Budapest Business Journal 3123

VOL. 31. NUMBER 23 | DECEMBER 15, 2023 – JANUARY 11, 2024

HUF 2,100 | EUR 5 | USD 6 | GBP 4

HUNGARY’S PRACTICAL BUSINESS BI-WEEKLY SINCE 1992 | WWW.BUDAPESTBUSINESSJOURNAL.COM

SPECIAL REPORT INSIDE THIS ISSUE

Deals of the Year

State Dominates Transactions Market Once Again The state has been playing an active role in the acquisitions market for years, and 2023 also fits this pattern.

The largest was the Vodafone deal that closed at the beginning of the year, but an even more significant purchase is in the pipeline.  15

2023 a Restrained 12 Months for Deals This has been a restrained year for development activity in the office and retail fields. The industrial and hotel sectors, however, have been more dynamic. Investment activity has reflected a cautious wait-and-see strategy.  18

SOCIALITE

Françoise Gilot Exhibition Opens in Country she Loved As the most comprehensive European exhibition of the work of Françoise Gilot to date, opens at the Műcsarnok Kunsthalle Budapest, David Holzer speaks to the show’s curator. 21

Building a ‘Community of Values’

NEWS

U.S. Ambassador David Pressman urges AmCham Patron members to continue to “represent American interests and values here” and NEWS offer a “bright future” to Hungarian and U.S. youths. 5 No Christmas Presents

Hidden in Hungary’s Macroeconomics The industrial sector started the last quarter with disappointingly weak data.

And despite real wages beginning to increase in September, shoppers have not returned to the stores more frequently yet. The better news is that inflation continued to fall in November.  3

BUSINESS

CIB: Inflation to Continue Falling in 2024 The Hungarian economy appears to be gradually emerging from the crisis, but given the global situation, the growth outlook for 2024 still looks subdued, according to CIB Bank analysts.  14

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Budapest Business Journal | December 15, 2023 – January 11, 2024

IMPRESSUM EDITOR-IN-CHIEF: Robin Marshall EDITORIAL CONTRIBUTORS: Luca Albert,

Balázs Barabás, Zsófia Czifra, Kester Eddy, Bence Gaál, Gergely Herpai, David Holzer, Gary J. Morrell, Nicholas Pongratz, Gergő Rácz.

LISTS: BBJ Research (research@bbj.hu) NEWS AND PRESS RELEASES:

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The Budapest Business Journal, HU ISSN 1216-7304, is published bi-weekly on Friday, registration No. 0109069462. It is distributed by HungaroPress.

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THE EDITOR SAYS

IN PRAISE OF REST, RELAXATION, PEACE AND PROSPERITY And so our little rock completes another circuit of the Sun, the days fall from the calendar faster than the last leaves of autumn from now skeletal trees, and the year gets closer to turning once more. Were I back in England, my Mum would be getting ready to open the front door to the New Year while beating the old one out through the back door using a wooden spoon and a saucepan, some Cockney tradition she supposedly inherited from her parents. Christmas, however you celebrate it, whether secular or religious, will doubtless be a noisy affair, but what my American family calls the Holidays also provides a time for reflection, as well as dusting off family traditions.

It has long been our tradition in the last issue of the year to look back at the year just gone. (We save the crystal ball stuff for the year to come for our first issue, which will be published on Jan. 12, 2024, if you want to mark your schedules.) What strikes me as remarkable is just how busy the state has been and how much more so it could be next year. The idea that Budapest Ferenc Liszt International Airport is such a strategic “crown jewel” is not new. Viktor Orbán’s government first tried to do so by making a non-binding offer in 2021; the process was shelved amid high inflation and volatility in global financial markets. This time around, the state is seeking to build a consortium that includes the French infrastructure giant Vinci SA, which has suitable experience through Vinci Airports, which owns 50% of

Gatwick in the United Kingdom and has other interests across the globe, including Portugal, Brazil and Japan.

This week, Bloomberg reported that Hungary is also attempting to involve the Qatar Investment Authority, the Gulf state’s sovereign wealth fund, in the consortium.

That is interesting because, according to no less a source than Wikipedia, the QIA owns a 5% stake in Vinci.

But having the time to reflect also gives you time to recall. The current government often lambasts the Socialist-led administration of Ferenc Gyurcsány for giving up the “crown jewel” of the airport back in 2005, when it was still known as Ferihegy Airport (Fidesz renamed it in 2011), when it was privatized, initially to British airport holding company BAA plc. That much is true, but what the government doesn’t talk about so much is that it would be much cheaper (well, less expensive) to buy Budapest Airport today, but for a tiny detail.

The initial privatization by the Socialists was for 74% of the airport. The state’s remaining 25% plus one share wasn’t sold until 2011 by, you guessed it, Viktor Orbán’s Fidesz government. I guess it had different priorities back then.

However you get to spend the Holiday period, I wish you whatever you would wish yourself (I’ll go for happiness, peace and prosperity, but I’m old fashioned like that).

Robin Marshall Editor-in-chief

Why Support the BBJ? • Independence. The BBJ’s journalism is dedicated to reporting fact, not politics, and isn’t reliant on advertising from the government of the day, whoever that might be.

• Community Building. Whether it is the Budapest Business Journal itself, the Expat CEO award, the Expat CEO gala, the Top Expat CEOs in Hungary publication, or the new Expat CEO Boardroom meeting, we are serious about doing our part to bind this community together.

• Crisis Management. We have all lived through a once-in-a-century pandemic. But we also face an existential threat through climate change and operate in a period where disruptive technologies offer threats and opportunities.

Now, more than ever, factual business reporting is vital to good decision-making.

For more information visit budapestbusinessjournal.com

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• Value Creation. We have a nearly 30-year history of supporting the development of diversity and sustainability in Hungary’s economy. The fact that we have been a trusted business voice for so long, indeed we were the first English-language publication when we launched back on November 9, 1992, itself has value.

Photo by Sándor Bauer / Fortepan

THEN & NOW The black and white photo from the Fortepan public archive dates from 1967 and showcases the stand of artisan gingerbread maker Tibor Ruff in the town of Mohács (200 km south of Budapest by road). The color picture, from state news agency MTI and taken on Dec. 12 this year, shows gingerbread art made in the village of Geresdlak (just 20 km northwest of Mohács) in Baranya County. Every winter for the last 15 years, the inhabitants of the settlement (population 717, according to the 2022 census) have made a miniature replica of the village from gingerbread.

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Budapest Business Journal | December 15, 2023 – January 11, 2024

News

• macroscope

No Christmas Presents Hidden in Hungary’s Macroeconomics

Hungary’s industrial sector started the last quarter with disappointingly weak data. And despite real wages beginning to increase in September, shoppers have not returned to the stores more frequently yet, according to October’s retail trade data. The good news is that inflation continued to fall in November, though analysts suggest a cautious approach even here.

ZSÓFIA CZIFRA

In October 2023, according to preliminary data released by the Central Statistical Office (KSH), the production volume of Hungary’s industry fell by 0.6% compared to September. On an annual basis (adjusted for calendar effects), the decline is 2.8%. Industrial production was 4.7% lower in the first 10 months of the year than in the same period in 2022.

The performance of the sector declined in the second half of 2022, and a situation close to stagnation can be observed this year, leaving the figures roughly at the level of four years ago.

These moderate results can primarily be attributed to the rise in energy costs and the slowdown in the external economy. An improvement is expected in the former, as gas and electricity contracts are renewed in the coming months.

As for the latter, for the time being at least, the outlook is rather deteriorating.

Industrial Production in Hungary (2001-2023 January-October)

previous month. In the whole of 2023 to date, there were only three months when the turnover increased on a monthly basis, which means that the recovery has still not come in domestic stores.

According to some analysts, the moderate household spending could have also contributed to the slowing inflation.

Consumer prices were 7.9% higher on average in November 2023 than a year earlier. Compared to October, the cost of goods was unchanged on average; however, motor fuels became 3.6% cheaper. In October, the annual inflation rate was 9.9%.

In the 12 months compared to November 2022, a price rise of 7.1% was recorded for food. Comparing just one month, November to October, consumer prices were unchanged on average.

Food became 0.5% more expensive on average, predominantly due to a

6.6% rise

in the price of seasonal food items (potatoes, fresh vegetables and fresh domestic and tropical fruits). Food prices excluding this group were unchanged on average.

Production volume index, same period of previous year equals 100

“The performance of the industry in October fell significantly short of expectations. Although production was down only by 2.8% year-on-year based on calendar-adjusted The generally weak European economy data, this is still a weak has also had an adverse effect on performance overall, as domestic output, Erste Bank analyst last year’s low base caused János Nagy said. He highlighted the weakening of the German economy: this improvement. We can it is still a determining factor in terms see this from the fact that of Hungarian export demand.

At the same time, he considered the volume of production it a positive sign that the Hungarian shrank again on a monthly Purchasing Managers’ Index had again risen into the range indicating recovery. basis, by 0.6%.”

Source:

“The performance of the industry in October fell significantly short of expectations. Although production was down only

by

2.8%

year-on-year based on calendar-adjusted data, this is still a weak performance overall, as last year’s low base caused this improvement. We can see this from the fact that the volume of production shrank again on a monthly basis, by 0.6%,” comments Péter Virovácz.

The chief economist of ING Bank believes that there is still no trendlike change in the performance of the industry: the decline has been continuous since the fall of 2022, and the total volume of production still cannot exceed the output level registered after the COVID crisis, in other words, at the beginning of 2021.

Breaking the ‘Glass Ceiling’

According to Virovácz, as long as the economic environment does not show a permanent change, industrial production will fluctuate around the production level observed since the beginning of the year, with some upside risk if the new capacities coming onstream can break through the current “glass ceiling.”

This also means that there is no reason for ING to change its forecast for the performance of the industry for the year as a whole. The bank still expects an annual decline of 5-6% for 2023.

Nagy also said that, according to the latest news, the SK On battery factory in Iváncsa (51 km southwest of central Budapest by road) officially started production

on

Nov. 6.

When at full capacity, expected in mid2024, the South Korean-owned factory could have a visible effect on Hungarian industrial production, Nagy says.

Retail trade data also showed an unfavorable picture in October: despite the 1.7% real wage increase in September, it seems that Hungarians’ spending has not accelerated yet. October’s retail trade volume decreased again compared to the previous month, meaning consumer confidence has still not been restored. In other words, the minimal increase in September did not mark the beginning of a turnaround, thelatest data from the KSH shows.

Illusive Recovery

According to data adjusted for seasonal and calendar effects, the volume of retail trade decreased by 0.3% compared to the

Customers saw poultry meat costs fall by 2%, edible oil by 1.9%, butter by 1.6% and sugar by 0.8%. Motor fuel prices were reduced by 3.6%.

Analysts are still cautious about the latest data, albeit they were more favorable than expected. They say that several risks are still present in the Hungarian economy. They believe falling residential demand plays a role in the current figure of 7.9%. As for the monetary policy of the National Bank of Hungary, analysts do not expect the central bank to change its interest rate path based on this lower-than-expected level.

Orsolya Nyeste, Erste Bank’s leading macroeconomic analyst, pointed out that consumer prices had not changed on a monthly basis, yet the annual index decreased to 7.9%. The moderation in food prices and the relative price stability of services support the disinflationary trend and forecast a further decrease in the coming months.

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Budapest Business Journal | December 15, 2023 – January 11, 2024

Focus on Hungary’s View on EU Ukraine Membership, Funding for Ukraine Crisis Roundup Prime Minister Viktor Orbán and Ukrainian President Volodymyr Zelensky were seen having a brief but apparently heated discussion at the inauguration of Argentine President Javier Milei in Buenos Aires on Dec. 9.

The pair were seen conversing for about 20 seconds amidst other guests in the Argentine parliament where the inauguration took place. Although Orbán neglected to comment on the exchange, Zelensky later said it “was as frank as possible, and obviously, it was about our European affairs.”

NICHOLAS PONGRATZ

Zelensky traveled to Washington on Dec. 12 to try to coax further funding from the United States for his country’s war effort.

U.S. President Joe Biden has struggled to get Congress to back additional support for Ukraine since September, with Senate Republicans rejecting a supplemental funding bill that included financial aid for Ukraine (and Israel) as recently as Dec. 6.

However, during a meeting with Zelensky in the Oval Office on Dec. 12, Biden announced that the Department of Defense would provide an additional USD 200 million military package for Ukraine.

Yet, as Zelensky made overtures for the United States to continue supporting his beleaguered nation, agents of Hungary have also been in Washington working against these very efforts.

According to a report from the U.K.based left-leaning daily newspaper The Guardian, Members of the Hungarian Institute of International Affairs and staff from the Hungarian Embassy in Washington participated in a two-day event hosted by the conservative Heritage Foundation think tank on Dec. 11-12.

During a closed-door meeting with Republicans, the Hungarian representatives reportedly pushed for an end to U.S. military aid for Ukraine.

Zsolt Németh, Fidesz MP, speaks during the general debate on the Hungarian parliamentary resolution on the opening of negotiations on Ukraine’s accession to the European Union at the plenary session of the Hungarian Parliament on Dec. 13, 2023. Photo by Szilárd Koszticsák.

Németh is well known as a Fidesz foreign affairs expert, having served as Secretary of State for Foreign Affairs between 1998 and 2002 and again from 2010-2014. He chaired the Parliamentary Committee for Foreign Affairs from 2002 to 2010 and has done so again since 2014.

Meanwhile, back on this side of the Atlantic, where it has significantly more leverage, Hungary has been steadfast about denying Ukraine any further financial support from the European Union and obstructing attempts to open accession negotiations.

Orbán has repeatedly refused to back a EUR 50 billion (USD 53.9 bln) support package for Kyiv and twice written to European Council President Charles Michel asking him to drop Ukraine membership talks from the agenda of the European Council summit on Dec. 14-15, where these decisions will come to a head.

According to Minister of Foreign Affairs and Trade Péter Szijjártó, EU affairs ministers failed to decide on starting accession negotiations with Ukraine at a meeting

on Dec. 12, deferring it instead to the upcoming council leaders’ summit.

Hungary remains the only holdout against these decisions, which require unanimous approval, with representatives from other EU member states growing frustrated at the perceived obstruction.

“The only way I can read the Hungarian position, not just on Ukraine but on many other issues, is that they’re against Europe and everything that Europe stands for,” Lithuanian Foreign Minister Gabrielius Landsbergis told reporters ahead of a meeting with his counterparts in Brussels on Dec. 11.

Others, however, still hold out hope that Hungary can be persuaded to cooperate.

“Our clear aim is to convince this state that the Ukraine facility is the right instrument to show our unity

and send Russia a clear signal, but also to support U.S. President Biden’s efforts to mobilize the further necessary support,” one German official said.

The Ukrainian Hungarian Democratic Alliance, representing the Hungarian minority living in Transcarpathia in Western Ukraine, published an open letter to Orbán and Michel, requesting negotiations on Ukraine’s membership in the EU be allowed to proceed.

Orbán responded by saying the Hungarian government would do “everything in its power to defend the rights of the Hungarian community in Ukraine” but said the time was not suitable for the start of accession talks.

“We will propose the European Union aim to establish a strategic partnership with Ukraine instead of a legally complicated EU membership,” Orbán replied.

Michel Calls for ‘Spirit of Compromise and Collective Responsibility’ In his invitation letter to the European Council Meeting on Dec. 14-15, published on the council website on Dec. 13, European Council President Charles Michel talked of how Feb. 24, 2022, the day Russia invaded Ukraine, had “marked a turning point in Europe’s history.”

Since then, the council has taken several unprecedented actions, he said. “Twenty-one months on, we are faced once again with the need to take bold decisions. They require our collective strength and determination, and the audacity to make the right choices,” he wrote.

“We must provide Ukraine with continued and sustainable political, financial and military support and, in particular, come to an agreement on providing EUR 50 bln for its longterm stability. We also have to agree to open accession negotiations with Ukraine, thereby giving it a necessary signal and bringing it yet closer to our European family,” Michel insisted.

But, in what may have been a nod to Orbán’s critique of EU preparedness for expansion, he wadded there is a need to “make our Union fit for the future and ready to take on new members.”

Beyond Ukraine, agenda items will include the revision of the Multiannual Financial Framework, security (not least creating an internal market for defense), and developments in the Middle East.

“A pivotal European Council lies ahead of us. Now is the time for decision-making. I call on you all to come equipped with a spirit of compromise, a sense of collective responsibility, with the Union’s interests and values at the forefront of your minds,” Michel concluded in his letter to leaders.

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Budapest Business Journal | December 15, 2023 – January 11, 2024

U.S. Ambassador Urges Business Leaders to Work for ‘Enduring, Shared Values’ In a calmly delivered yet passionate speech to an exclusive dinner for Patron members of the American Chamber of Commerce in Hungary on Dec. 5, U.S. Ambassador David Pressman went from a long list of benefits American businesses offer to Hungarians via Washington’s deep concerns over the policies of Prime Minister Viktor Orbán’s government in recent years to optimism for the future based on the country’s youth.

With all the news of numerous Chinese and other Asian countries’ battery plants and manufacturing investments in recent years, it was, perhaps, appropriate to be reminded of the vital role the United States continues to play in the Hungarian economy.

“We [the USA] are the third largest investor in Hungary, its second most important trade partner, and the top export market outside the European Union,” Pressman said at the start of his speech. “Bilateral trade in recent years has been valued at nearly USD 10 billion in merchandise trade, and another billion in services.”

Yet these numbers are so big, and the impact of U.S. companies so broad, that the raw data can sometimes “obfuscate as well as illuminate” the benefits American investments bring to ordinary people around the country.

To underline this point, the New Yorkborn lawyer reeled off examples of how

he said. “We have committed to be willing to shed American blood to defend Hungary not because it fulfills its narrow, contractual obligations, devotes a certain percentage of the budget to its military, participates in joint exercises, etc., but because we are both members of this community of values,” Pressman emphasized.

Crucially Needed Aid

U.S. Ambassador David Pressman. Photo by Tamás Nagy Hartl / AmCham U.S. companies have directly impacted Hungarian lives, citing, for example, the results of the strategic partnership between the Swiss-based partly U.S.owned pharmaceutical company Novartis and Budapest’s Semmelweis University.

As a result, Semmelweis is now “one of the only institutions in the region that has access to ophthalmic gene therapies that treat retinal dystrophy, improving the lives of dozens of Hungarian babies by slowing down vision loss and even, in some cases, restoring vision,” Pressman said.

U.S. companies have also played a significant role in training and enabling Hungarian youth to find well-paying, cutting-edge IT jobs. Cisco’s Networking Academy, for example, has helped train

nearly

KESTER EDDY

News | 5

90,000

Hungarian students who have since entered the IT workforce. The ambassador also noted that National Instruments has supported 10 schools serving under-represented and underserved children, giving them access to a year-long robotics program.

Such examples are merely the tip of the iceberg when it comes to the impact of U.S. investment in Hungary.

‘Rolling Dollars’

“The list rolls on and on. So, when the government of Hungary speaks of ‘rolling dollars,’ so do we,” he said, taking a swipe at accusations from the government that “rolling dollars” of U.S. government money had been paid to the Hungarian opposition party alliance before the 2022 elections.

“The dollars rolling into Hungary

by U.S. companies are changing lives, employing Hungarians, curing sick babies, treating cancer, healing sick hearts, and more,” Pressman insisted.

In light of this, when Orbán declares the United States to be one of Hungary’s top “adversaries” and states publicly that the U.S. Government is trying to overthrow his party, “these words land not only in Washington D.C. but in your headquarters and in your board rooms,” he stressed.

Such talk, in other words, severely undermines corporate trust in Hungary.

Similarly, he warned that when “windfall taxes” are imposed, or Minister of Construction and Investment János Lázár declares foreign companies in specific sectors “persona non grata,” recommending they sell their firms and get out, “the impact on foreign investment is real.”

Equally, Pressman highlighted U.S. concerns over the draft before parliament of the “Sovereignty Protection” bill.

“When the government proposes to create a new domestic security agency, armed with unfettered and unchecked investigative powers, including tapping the nation’s intelligence services, issuing subpoenas, demanding documents from and depositions of anyone involved in ‘democratic debate,’ all without judicial oversight, it is alarming,” he said, declaring the draft “makes Moscow’s foreign agent law look mild and meek.”

After leaving the Soviet-era Warsaw Pact military grouping and Comecon, its trading arm, in the early 1990s, Hungary had embraced and been accepted as a member by the NATO Western defense alliance and the European Union. Moreover, it “was a shining symbol of success among those countries to emerge from behind the Soviet Union’s Iron Curtain,” the ambassador argued.

Yet today, “alone among our Allies, Hungary’s leadership seems to think of Hungary’s membership in NATO as a contract rather than a covenant,”

Despite Hungary’s reliance on NATO allies for its security, its political leadership “feels comfortable disregarding the interests of those same allies, including during a time of war in Europe,” he said. “That disregard is evident when the Prime Minister embraces [Russian President Vladimir] Putin, when his government threatens to hold up crucially needed aid to its neighbor, Ukraine, while Ukrainian men, women, and children are murdered by war criminals.”

Pressman rounded on the Hungarian PM’s recent explanation that Hungary’s foreign policy philosophy was, by design, “radical,” saying, “I would submit that it is in our countries’ national interest to sustain a foreign policy grounded in enduring values, shared interests, and long-term strategic commitments among allies, one that has yielded unprecedented strategic benefits.”

Declaring that he remained an optimist about Hungary’s future, especially regarding its youth, the diplomat concluded, “We, all of us, need to do everything we can to offer them a bright future for Hungary and its relationship with the United States. I understand that the business world has a bottom line to watch. [….] I’m grateful for everything you do to represent American interests and values here.”

It was stirring stuff, but the question remains: is it likely to substantially and positively induce any change in the Hungarian government’s policies?

“No,” opined Zoltán Ranschburg, a senior analyst with Republikon Institute, a liberal-leaning think tank, speaking afterward to the Budapest Business Journal.

“As we have seen from time to time, strong criticism only triggers stronger counter-reactions from the government’s side, and this [will prove] no exception,” he said, noting that Minister of Foreign Affairs and Trade Péter Szijjártó had already referred to the speech as an “outburst,” claiming that it wasn’t in Pressman’s interest for the United States and Hungary to have a good relationship.

Could, at least, Pressman’s appeal for support from AmCham’s business elite yield positive results? Perhaps, but for Ranschburg, it was unclear from the speech what the ambassador expects from the corporate leaders in representing American interests and values.

“This could range from operating an inclusive business model to supporting Budapest Pride,” he said.

“Nevertheless, Pressman’s words were a guarantee of government support to the American companies acting in line with the values represented by the U.S.”

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Budapest Business Journal | December 15, 2023 – January 11, 2024

Steiner: Electrification key Driver to Hungary’s 2050 Emissions Target Hungary has targeted a 50% reduction in greenhouse gas emissions by 2030, according to its revised plans on energy policy and climate change submitted to the European Commission last August. To fulfill this goal, the government must intervene in “several fields,” particularly electricity, State Secretary of Energy and Climate Policy Attila Steiner of the Ministry of Energy said at the 2023 Budapest Climate Summit on December 4.

KESTER EDDY

“The key topic is electrification: how we can shift from fossil-fuel consumption to electricity consumption. And this is good news, if we manage to electrify because we have atomic energy, renewable energy and local production, [so we] will not have to import so much as with fossil fuels,” he said in the opening presentation of the summit.

He also noted the need for intervention to reduce demand, particularly for fossil fuels (which would reduce emissions and enhance energy sovereignty), along with using substitute fuels, such as biogas, geothermal energy, and hydrogen.

The Climate has Gone ‘Beserk’ “Even in just the last few months, the climate has gone berserk,” an animated Diana Ürge-Vorsatz, vice chair of the Intergovernmental Panel on Climate Change, told the summit.

“They have published this paper alerting us that we have entered a climate era of uncharted territories, and we are in totally uncertain areas,” she said. She spoke from COP28 and stressed that she was

own sustainability targets. MBH Bank, Hungarian-owned and recently formed from the merger of three former highstreet banking operations (and the main sponsor of the summit), was keen to present its ESG achievements and goals.

The bank’s vision “is supported by two strategic objectives: one is to be a partner to our clients in achieving their sustainability goals, and the other is to raise awareness of sustainability issues among our clients,” András Puskás, deputy chief executive of MBH Bank, told the summit.

MBH’s financing for solar projects (primarily inherited from its constituent banks) had already

exceeded

HUF 50 billion

The Transforming Energy System panel discussion featured Christian Zinglersen (EU Agency for the Cooperation of Energy Regulators), Zsolt Jamniczky (E.ON Hungaria Zrt.) László Fazekas (MVM), Franck Neel (OMV Petrom), and Zsófia Beck (Boston Consulting Group), and was moderated by Pál Ságvári (the Hungarian Energy and Public Utility Regulatory Authority, at far left).

But how, in reality, could the revised targets be achieved? There is no single or simple answer, Steiner emphasized.

Rather, a wide portfolio of solutions is needed. Hungary has already made significant steps in the right direction, notably in photovoltaic, which hit

5.5 GW

of installed capacity, all with grid connections, at the end of November.

“Green electricity production is very important [….]. Just for comparison, the Paks nuclear plant is 2 GW capacity, so [solar] is two-and-a-half times that capacity, which I think is very good progress,” he said, adding that some 5 GW of additional, though unspecified capacity was “in the pipeline.”

Meanwhile, the expansion of wind generation, which has been stalled by severely restrictive regulations for the past decade, is also set for a boost through legislative changes, Steiner argued.

(In November, Minister of Energy Csaba Lantos said that an envisaged reduction in the minimum distance between wind farms and inhabited areas from 12 km to 700 meters could triple wind energy capacity

quoting from bio-science sources rather than the “climate community.”

“We see that every climate indicator, all the way from Antarctica, the North Atlantic temperature, the ocean temperature, the world surface temperature, wildfires are all out of any normal, reasonable range, and there is no sign of returning to that [former] range. We’d already had the alarming news that this summer, the last June-August, was not only the warmest on records, but it was 0.4ºC warmer than any time before.”

in Hungary from the present 330 MW to 1,000 MW in the near future.)

Battery Storage Plans

Among the package of plans, the state secretary noted that the government has just published a new investment grant scheme for companies, primarily transmission and distribution system operators, to establish up to 885 MWh of battery storage projects to enhance their energy balancing potential while at the local level, a new support scheme will be introduced in January to support household solar generation and storage systems.

Along with the drive to create more mico-generation capacity, the government remains firmly committed to nuclear development, Steiner stressed. To this end, Hungary was among the 22 signatories at the COP28 UN Climate Conference in Dubai that signed up to an initiative to triple the role of nuclear power in global electricity generation by 2050.

To help achieve this, Hungary plans to expand the Paks Nuclear power station with two new

2,400 MW blocks

and extend the lifetimes of the existing four 500 MW reactors by a further 20 years.

Naturally, such a swathe of energy investment projects raises the question of finance. Steiner pointed to the European Union’s REPowerEU plan as a significant funding source, from which Hungary has aspirations to receive up to HUF 1.75 trillion for clean energy sector development.

“We are very close to getting the final approval. The European Commission has already approved that plan. If we manage to get those funds, then we can kick-start a lot of projects, significantly contributing to reaching our targets by 2030,” Steiner concluded.

Inextricably Involved

Banks, as intermediary financing agents, are inextricably involved in such investment plans and, indeed, have their

by the end of 2022, along with HUF 55 billion in funding for green office buildings.

“This year, we have prepared and published a Green Lending and Green Financing Framework, in line with national and international standards, to lay the foundations for our future green lending and bond issuance activities. The objectives set out in the framework include green lending for renewable energy, sustainable transport, sustainable real estate and sustainable agriculture projects,” Puskás said.

Along with its own, ambitious targets to make its internal operations carbon neutral, MBH has specifically committed to increasing the share of green credits in its total portfolio by “at least four percentage points by the end of 2024, and we will launch an intensive green product development program to support this,” he added.

Subsidies no Long-term Solution “About the future of competitiveness, I think that is the key issue indeed,” said Christian Zinglersen, director of the European Union Agency for the Cooperation of Energy Regulators.

“If we assume that enormous volumes of very cheap pipeline gas are not coming back, then this question comes with a vengeance,” he cautioned, speaking on the panel discussion entitled “Transforming Energy Systems.”

“I think any proposition that we can subsidize our way out towards competitiveness is totally unrealistic; there is not the fiscal balance sheet capacity anywhere in Europe to do that in the long term. Maybe in the short-term, in emergency situations, that could help, but not in the long term,” he said.

“So, what is the asset that we have in Europe which would make us more competitive than otherwise? For me, the answer to that is the [regulated] internal market. […] I think that is our strategic asset.”

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Budapest Business Journal | December 15, 2023 – January 11, 2024

Q1-3 Real Estate Investment Lowest in CEE for a Decade Investment figures for the first three quarters of the year (the most up-to-date statistics at the time of writing) have fallen in Hungary and Central and Eastern Europe, according to iO Partners and JLL and Colliers.

This reflects the current cautious waitand-see strategy being adopted by investors.

GARY J. MORRELL

The leading market in the region remains Poland, with EUR 1.6 billion in investment volume for the period, followed by the Czech Republic at EUR 1.2 bln. Hungary traditionally comes third after these countries regarding commercial real estate volume, with EUR 550 million in deals recorded for Q1-3 2023.

This represents the lowest level of investment activity in the CEE over the past 10 years; the markets have shrunk by 59% in Hungary, Poland, the Czech Republic, Slovakia and Romania, according to iO Partners and JLL. Prime office yields have shifted by 75-100 basis points, with Prague having the lowest in the region, having moved out from 4.5% to 5.5%. Prime office yields for Warsaw have shifted from 5% to 5.75%, and Budapest has moved from 5.5%

to

6.5%.

Hungary, therefore, provides a significant yield premium on both Western European markets and Poland and the Czech Republic.

News | 7

Real Estate Matters A biweekly look at real estate issues in Hungary and the region

Will the sun rise on a better investment market in Hungary in 2024? Photo by Dmitry Pistrov / Shutterstock.

Romania has the highest prime office yields in Central Europe at 7.75%.

Colliers estimates Budapest office yields at 6.25%, industrial at 6.5% and shopping centers at 7.5%. This compares to the lowest CEE yield in Prague at 5.25% for office, with industrial at 5% and shopping centers at 6%. By way of comparison, Germany, for example, has yields below 5% for office and industrial.

both in their own and international markets. As a result, there is currently less competition for domestic capital in CEE,” says Kevin Turpin, director of CEE capital markets at Colliers.

Mind the Gap

A clear gap remains as to pricing between buyers and sellers. Further, there is a lack of evidence, particularly at the high end of the markets. Prime yields in core CEE markets are seen as having a yield spread of 100-150 basis points with Western Europe.

Regarding market sectors, average yields for the region are the highest for shopping centers at 7%, followed by industrial at 6.75% and office at 6.5%, the figures from iO Partners and JLL show.

In the first three quarters of 2023, domestic CEE investors have been responsible for

about

60%

of all investment volumes in the CEE-6 (Bulgaria, the Czech Republic, Hungary, Poland, Romania, and Slovakia), with Czech capital transacting 33% of the volume and Hungarian capital 9% according to Colliers.

“International investors are assessing the challenges and opportunities

Kevin Turpin, director of CEE capital markets at Colliers.

Challenges Remain

“International investors will be back and active on the sell and buy sides once the pricing gap has closed. The next 12-18 months will be a great time to acquire real estate, yet challenges remain with international and institutional capital applying caution in general, not just towards CEE,” he adds.

Rita Tuza, director of capital markets at iO Partners Hungary, says Hungarian investors undertook

70% of

investment deals in the first three quarters of the year. Colliers, meanwhile, expects CEE investment volumes for the CEE-6 to be EUR 4 bln-4.5 bln.

“The global outlook remains quite mixed: while we are starting to have more clarity on inflation, this does not necessarily mean more clarity on rates or the threat of a banking crisis and a potential credit crunch in advanced economies,” Turpin points out.

“Other geopolitical and COVIDrelated crises remain in place, which explains why the global economic outlook, along with the CEE-6’s outlook, worsened a bit compared to a few months ago. That said, as long as no external event is driving a material downward shift in economic activity in the Eurozone, we would expect the CEE to continue to outgrow their Western partners over the long term, thanks to EU funds and an attractive business backdrop,” he says.

“It is difficult to be precise, but at the moment, indications suggest a turnaround in the investment markets towards the end of 2024 and into 2025. It is already happening to some extent, but at a slower pace than other markets in Europe,” Turpin concludes.

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Budapest Business Journal | December 15, 2023 – January 11, 2024

in Brief

CPI at 7.9% in November

Hungary’s annualized consumer price index reached 7.9% in November, falling two percentage points after dropping into the single-digit range in October, according to data released by the Central Statistical Office (KSH) on Friday.

CPI has fallen sharply after peaking at 25.7% in January, supported by government measures and central bank monetary policy. Food prices rose 7.1% in November, slowing from a 10.4% increase in the previous month. Soft drink prices rose 17.9%, but flour prices fell 15.8%, egg prices dropped 24.4%, and cheese prices declined 10.4%. Household energy prices fell 18.1%, albeit from a high base. Gas prices were 36.2% lower, and electricity prices declined 3.5%. Consumer durable prices edged down 0.4%.

S&P Affirms Hungary’s ‘BBB-’ Rating S&P Global Ratings affirmed Hungary’s “BBB-” sovereign rating with a “stable” outlook at a scheduled review on Dec. 8, according to a press release. In its rationale for the rating action, S&P pointed to falling inflation, a marked reduction in the current account deficit, albeit supported by lower global energy ADVERTISEMENT

Karikó, Krausz Receive Nobel Prizes at Awards Ceremony Photo by Szilárd Koszticsák / MTI

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prices, and a recovery of the forint exchange rate. S&P projects a 0.5% GDP contraction in 2023 but sees the economy expanding by 2.6% in 2024.

Fiscal consolidation will “remain more challenging,” S&P said, projecting general government deficits of 5.2% of GDP in 2023 and 4.5% in 2024. The rating agency added that state debt levels are expected to “broadly stabilize” at around 72% of GDP until 2026. S&P’s projections are based on the assumption that Hungary and the European Commission will ultimately reach an agreement, and some EU funding, which has been withheld over ruleof-law concerns, will be released in the first half of 2024.

Q3 Tourism Spending Rises 44% Y.O.Y. Spending by foreign tourists in Hungary rose 44% year-on-year to HUF 1.188 trillion in the third quarter, according to data released by the Central Statistical Office (KSH). Close to 60% of that spending was on recreation and spa activities.

Spending by day-trippers increased 53% to HUF 257 billion and spending by visitors who stayed for longer rose

Nobel Prize-winning scientists Ferenc Krausz (left) and Katalin Karikó at a ceremony in their honor at the Hungarian Embassy in Stockholm on Dec. 9, 2023.

Biochemist Karikó shared the Nobel Prize in Medicine and Life Sciences with American microbiologist Drew Weissman for their discoveries that paved the way for the development of mRNA-based vaccines. Krausz shared the physics prize with French physicists Anne L’Huillier and Pierre Agostini for founding the field of attosecond physics and for their research on electrons.

42% to HUF 932 bln. German visitors spent the most: HUF 207 bln. Austrian tourists spent HUF 172 bln. Spending

by Hungarian tourists abroad increased by 50% to HUF 610 bln during the period. They spent HUF 95 bln in Greece, HUF 69 bln in Austria and HUF 59 bln in Germany.

Orbán, Zelensky Speak Briefly at Milei Inauguration Ukrainian President Volodymyr Zelenski and Hungarian Prime Minister Viktor Orbán spoke briefly while attending the inauguration of Argentine President Javier Milei on Dec. 10, video on the Argentine Senate’s YouTube channel showed, according to international news wire Reuters. The men were shown conversing back and forth for about 20 seconds as they mingled with other guests in the Argentine parliament ahead of a European Union summit next week. No details were immediately available about what they discussed. Ukrainian media had speculated the pair might meet in Buenos Aires to resolve differences over Kyiv’s bid for European Union membership. The summit is set

According to Hír TV, King Carl Gustaf of Sweden awarded the prizes at a ceremony in the Stockholm Concert Hall on Dec. 10. Astrid Söderbergh Widding, president of the board of trustees, greeted this year’s winners on behalf of the Nobel Foundation. The ceremony was attended by 1,560 guests, including family members, former winners, members of the royal family, the Swedish government and parliament, and representatives of the diplomatic corps.

to decide whether to start membership talks with Ukraine. Orbán has repeatedly said he opposes starting such discussions now.

Orbán: Ukraine ‘Unprepared’ for EU Accession Prime Minister Viktor Orbán said the matter of Ukraine’s European Union accession was “untimely” and “unprepared” in an interview with French weekly Le Point. “Ukraine is one of the most corrupt countries in the world, which is why it isn’t ready for accession talks,” Orbán said in the interview published on Friday.

Orbán said Budapest wouldn’t “veto” but would “not consent” to the EU’s plans for Ukraine’s accession. He noted that Ukraine’s accession would require more payments into the EU budget.

At the same time, including Ukraine’s farm sector in the union could “easily ruin” the agriculture sectors of several member states. Instead of accession, he pressed for a strategic partnership with Ukraine to reach agreements on agriculture, customs duties and security. “I agree with raising the cooperation to the next level, but not with accession,” he added.

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Budapest Business Journal | December 15, 2023 – January 11, 2024

Consumption Growth Will Have to Wait, Market Analysts Warn

For three months in a row, the inflation rate has been falling. What is more, the target set by the government to reach a single-digit number by December, has been achieved (the figure had dropped to 7.9% in November), albeit Hungary still has the highest rate in Europe.

It would seem that the population is focused on the latter part of the statement, that inflation is high, rather than the actual number. A study released on Nov. 17 by GKI looked at the September inflation of 12.2%, which, based on a survey of 1,000 households, was perceived as actually being at 32.8%. No reasonable salary raise could counterbalance such a perceived depreciation, GKI notes.

“The increase in net earnings slightly above inflation (14% in the first eight months of 2023) was also felt to be insufficient (as their real earnings decreased even with this), and the former might affect the bank deposit and government securities markets (the investment volume decreased/ stagnated with the given yields),” it said.

Earnings, however, show significant differences regionally and based on education level. While this is probably not surprising, the level of discrepancy certainly is. The GKI study released on

Nov. 28 shows

that, in Budapest, the average monthly net income is HUF 370,000, compared to HUF 243,000 in villages.

Between counties, the difference can amount to 42%, as seen in the case of Pest and Szabolcs-Szatmár-Bereg.

Among other factors (industry, tourism, etc.), the high income in a county is also

HR Matters A monthly look at human resource issues in Hungar y and the region

Gki Economic Sentiment Index and its Elements

This issue of HR Matters will focus mainly on Hungarian households’ earnings and spending, given that the highest outgoings are in December, for obvious reasons. In this analysis, several polls conducted by the GKI Economic Research Co will offer relevant data as a starting point.

BALÁZS BARÁBAS

News | 9

(2019-November 2023)

fueled by the proportion of university graduates working in the area.

“The largest proportion of graduates live in the capital (especially on the Buda side: 57.4%), but their weight is high in the Pest county, the big cities and their surroundings, and around Lake Balaton,” GKI notes.

said they have no emergency funds.

One-third of Hungarians also said that they had paid at least one utility bill after the due date, indicating as a reason for doing so a lack of money (52%) or simply forgetting the due date (36%).

Graduate Salaries

How does that impact the wealth of a county? The salary of graduates exceeds that of skilled workers by 38–95%, depending on whether it is a college or university degree, and the proportion of graduates explains 61% of the differences in earnings between settlements, GKI says.

Consumer confidence seemed healthy, albeit slightly lower in November than in October, which saw the highest measure in the last 18 months, as presented in the latest GKI economic sentiment chart.

A more dramatic situation is reflected in another survey by Intrum.

“Hungarian consumers are in a more difficult situation than ever before in previous years. Many of them see the future as hopeless, as their current income does not cover everyday expenses,” says Intrum, which describes itself as Europe’s undisputed market-leading credit management services company.

The company says that Hungarians are looking to save on everything possible, including meals and Christmas presents.

But this is not a Hungarian specificity; it is found across Europe, as reflected in Intrum’s European Consumer Payment Report 2023, released on Dec. 5.

Based on data gathered in September in

20

European

countries, 20% of consumers have no savings, while in Hungary, almost one-third of the respondents, 31%,

Tamás Fehér, Manpower director for Hungary, Croatia and Slovenia.

Intrum, in cooperation with GKI, also regularly releases a household solvency index, IFI. For three quarters in a row, the IFI has grown in Hungary, from 6.51 in Q1 to 11.6 in Q2 and 12.99 in Q3. While there is growth compared to previous quarters, the Q3 index is still at its lowest in the last 10 years. But why, if the inflation has been getting continuously lower each month?

Judit Üveges, sales director at Intrum, explains: The monthly inflation is only one figure, but prices for different products grow at different rates. Rises in food and utility prices impact families with low incomes the most.

Consumption Data

“This is also seen in consumption data: while high-income families can even increase their consumption, pensioners, employees in the state administration, and those living on a minimum wage must significantly lower their consumption,” Üveges says.

The good news, at least based on the GKI economic sentiment report, is that businesses’ willingness to employ improved slightly in November compared with the previous month, with the proportion planning to lay off and increase their workforce almost equal. Pessimists are in the majority in the construction sector, while optimists dominate the services sector. In industry and retail trade, the two proportions are essentially equal.

The public’s fear of unemployment has risen somewhat compared to October, GKI noted. However, the employment outlook is not so bad. According to a forecast released on Dec. 12 by staffing company Manpower Hungary,

31% of

employers plan to hire in Q1 2024, with 21% eyeing layoffs.

In the first quarter, it is mainly employers in the IT, finance, and real estate sectors that are preparing to expand their labor force. Workers skilled in communication services, logistics, and the automotive industry also have higher chances of new jobs in Q1.

Companies in the consumer products and services sector are planning minimal or zero labor force expansion.

This indicates that “players are aware that, after the significant backdrop this year, private consumption will return at a slow pace to previous levels,” said Tamás Fehér, Manpower director for Hungary, Croatia and Slovenia.

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Budapest Business Journal | December 15, 2023 – January 11, 2024

Business

and privacy issues to ensure that the technology serves humanity positively.

The conference also delved into technical aspects, discussing the latest developments in machine learning, neural networks and data analytics. These technical sessions aimed to demystify AI and provide a deeper understanding of its underlying mechanics. Experts shared insights into how artificial intelligence algorithms process vast amounts of data to make accurate predictions and decisions, a critical capability for organizations looking to leverage big data for strategic advantage.

Another critical theme of the conference, unsurprisingly given the organizer, was the integration of AI into In an era when financial services. Financial experts technology is from MBH Bank and other institutions discussed the transformative impact relentlessly reshaping on banking, including risk assessment, fraud detection, personalized banking the business landscape, services, and algorithmic trading. These MBH Bank hosted discussions underscored the potential of AI to revolutionize the sector, offering a groundbreaking greater efficiency, improved customer conference on artificial experiences, and new avenues for growth and innovation. intelligence on Nov. Regarding strategy, the event 30. The event kicked highlighted how AI is already becoming an integral part of business decisionoff what will be known making. Business leaders and strategists as the MBH Corporate discussed how AI identifies market trends, optimizes supply chains, and Conferences series. improves customer engagement. The The organizers hope it conference featured several case Péter Ratatics of MOL (at podium) was among the many speakers. studies where AI-driven strategies led will mark a significant to tangible business improvements, demonstrating the practical value of the milestone in Hungary’s Vinnai explained. He predicted that AI of AI, shedding light on how it is technology in real-world scenarios. journey to integrate could increase European productivity revolutionizing sectors ranging from by anywhere between 11-37% by 2035. finance and healthcare to manufacturing AI into various and consumer services.

“The adoption rate of business sectors.

AI and Hot Dogs Along the way, the conference new technologies is A standout session was led by Péter highlighted Hungary’s strategic position Ratatics, executive director of consumer in the global technology landscape. accelerating. Companies services at MOL Group, who shared the With a robust digital infrastructure and GERGELY HERPAI that successfully implement gas and oil giant’s AI-driven initiatives. innovative mindset, Hungary has the these technologies As a case study, he mentioned MOL’s potential to become a significant player Levente Szabó, deputy CEO of MBH hot dog design, which increased sales by in the digital economy. The insights gain a significant Bank, laid out the significance the 20% and reduced waste by 43%. He was shared at the conference not only technology holds for commerce in his followed by György Tilesch, president reflected current trends but also outlined competitive advantage.” opening remarks. of the PHI Institute, who delved into a path for future developments.

“The impact of artificial intelligence the potential of AI, emphasizing the In addition to the business perspective, on the business world cannot be need for leadership-driven adoption and The role of artificial intelligence in the conference also touched on the overestimated. This inaugural implementation of the technology. driving innovation was another point of societal implications of AI. Experts conference aims to shed light on this The conference wasn’t just about focus. Speakers from various industries discussed how it could help solve transformative technology,” he explained. discussions and predictions. Péter shared how AI is being used to foster complex societal challenges, from “Our future is inextricably linked to our Balogh, MBH Bank’s executive director creativity and innovation, leading to the improving healthcare outcomes to ability to innovate.” of corporate and special financing, and development of new products, services, enhancing education methods. The role State Secretary Gergely Fábián of Sándor Bertalan, the executive director and business models. These insights of artificial intelligence in promoting the Ministry of Economic Development of the SME division, gave a presentation highlighted the ability not only to improve sustainability and environmental highlighted the central role AI will likely on the application of digital avatars in protection was another focus, illustrating existing processes but also to create new play in economic growth. interviews using a Chat GPT4-based opportunities for businesses to differentiate how technology can be a force for good.

“The impact of artificial intelligence text generator integrated with the bank’s themselves in the marketplace. on global GDP is colossal, potentially proprietary software.

The conference also provided a platform Avoiding Unintended reaching trillions of dollars. Companies As Hungary’s economic landscape for startups and entrepreneurs to share Consequences using this technology are experiencing evolves, the integration of AI is their experiences with AI. Young tech The need for ethical considerations significant revenue growth,” he said. emerging as a critical pillar for future companies showcased their AI-based in the use of AI was also highlighted.

Balázs Vinnai, chief advisor to the growth and competitiveness. The solutions, providing valuable insights One of the crucial concerns addressed chairman at MBH Bank and president conference provided a platform for into how entrepreneurs are using the was the ethical use of AI and the of the ICT Association of Hungary exchanging ideas and charting the technology to solve unique challenges potential for unintended consequences.

(IVSz), emphasized the critical need for trajectory of artificial intelligence across and create disruptive innovations.

Experts discussed the importance companies to integrate cutting-edge different sectors, highlighting the Educators and experts also discussed of transparency, accountability, and technologies into their daily operations to importance of embracing innovation for the need to integrate AI education into governance in AI systems, emphasizing stay ahead in the competitive marketplace. sustainable business success. academic curricula. They emphasized that while the technology offers “The adoption rate of new technologies is The event concluded with a panel the importance of preparing the tremendous benefits, it must be accelerating. Companies that successfully discussion featuring executives from next generation of professionals and developed and deployed responsibly implement these technologies gain Nestlé, Bosch, Telekom and Siemens. ensuring the workforce has the skills to avoid potential pitfalls such as bias a significant competitive advantage,” It explored the practical applications to thrive in an AI-driven future.

The Pioneering Role of AI in Reshaping Corporate Hungary

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AmCham: Busy Days Behind, More to Come The American Chamber of Commerce in Hungary held its 35th general assembly and board elections on Dec. 4. The organization said it was closing an eventful and financially sound year, with 2024 promising to be similarly successful, with the highlight of the 35th anniversary, due in June.

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AmCham president Zoltán Szabó underlined a new milestone the organization reached this year: not only is it a unifying voice for its membership community, but it has also become the driving force of a unique cross-chamber advocacy alignment.

“We played a key role in fostering relations between international chambers, resulting in reaching a unified position on critical topics such as education and healthcare,” Szabó said. He drew attention to a joint business forum with Minister of Interior Sándor Pintér, which he said was particularly important in this regard.

Further meetings with political decision-makers and the representatives of chambers and professional organizations led to significant progress in diverse areas, from the pharma tax burden to deductible R&D spending.

In addition, AmCham engaged in consultations with other stakeholders on competitiveness, involving thenMinister of Justice Judit Varga and the Embassy of the United States.

A series of professional events were organized throughout the year. The ninth edition of the Business Meets Government Summit, co-hosted by the Hungarian Investment Promotion Agency, welcomed renowned experts, high-ranking government officials, and representatives of prestigious think tanks and academia.

The conference provided a platform to discuss the most burning questions in energy, workforce, education and healthcare.

Altogether six business forums were organized throughout the year, hosting leading political figures such as Mayor of Budapest Gergely Karácsony, ministers Pintér (internal affairs), Csaba Lantos (energy), Tibor Navracsics (regional development and EU funds) and Péter Szijjártó (foreign affairs and trade), as well as Hungarian Ambassador to the United States Szabolcs Takács.

with the local national AmCham in the country holding the presidency.

“This will give us even more opportunities for collaboration in the policy field. In fact, AmCham EU is scheduled to pay a visit as early as February to meet with key stakeholders,” Lippai-Nagy said. “Our crown jewel, the Business Meets Government Summit, will be held for the 10th time in 2024, and we are already taking steps to ensure a more regional representation with regard to the Hungarian presidency.”

AmCham Hungary is also working on its annual recommendation package, which will take a new form. It will focus on strategic highlights, and members should be expected to share case studies that can be incorporated into that package.

The upcoming U.S. presidential election in November 2024 will serve as one of the biggest highlights of the coming year, with AmCham providing a platform to discuss expectations AmCham members vote at the Dec. 4 annual assembly. and the results of the elections.

The event calendar will be as full as always: committee meetings, seminars, Beyond Advocacy AmCham Hungary CEO Írisz Lippaiwebinars, and policy and business Advocacy work was just one, albeit Nagy gave an overview of what is forums will provide ample opportunity for a significant, part of the year’s down the line in the upcoming months professional development and networking. activities. The community pillar in the regular triangle of advocacy, A career orientation program, Business remained strong. The Independence community and knowledge. She noted Services Sector Open Days and board Day Party (July 2) and Thanksgiving that next year will be a special one as the simulation games are on the agenda, too, Dinner (Nov. 20) were both very chamber celebrates its 35th anniversary as are the regular social events such as the popular events. in 2024 and will feature special July 4th Party or Thanksgiving Dinner.

Knowledge transfer was nurtured programs, including an anniversary Edit Bencsik, a member of the board on many occasions, too: in the spring, gala and a new platform promoting of trustees of the AmCham Foundation, AmCham launched a five-part HR best practices and knowledge-sharing shared the results of AFC’s year. There masterclass series. Apart from that, in diversity and inclusion. was much to be proud of as 300-plus various seminars, webinars and policy kids were impacted, five children’s More Collaboration forums were held to provide further homes were supported, and donations Preparations for the 35th anniversary food for thought for members. helped digital education. on June 7 will coincide with those Outgoing secretary-treasurer In memory of the father of modern for Hungary holding the rotating Mike Carlson delivered his financial lobbying, the Iván Völgyes Award EU presidency. In this regard, report. He reported that AmCham honoring those who contribute most AmCham EU’s role can’t be emphasized Hungary was stable, having closed the to U.S.-Hungarian relations went to 2022 financial year with a positive result. enough in that it works together AmCham veteran David Young this year.

The new AmCham board after the December 2023 elections.

New Year, New Board The general assembly elected several new officials. Ákos Janza, managing director and head of enterprise transformation and global head of offices at MSCI Inc., became first vice president, PwC Hungary partner Ákos Burján was voted secretary-treasurer, and.

Judit Budai, co-managing partner of Szecskay Attorneys at Law, is now

a member of the Supervisory Board.

Etelka Dobi (The Janssen Pharmaceutical Companies of Johnson & Johnson) was elected as a board member at large, but an unexpected twist followed when, for the first time in AmCham history, two candidates received the same number of votes for the second such position.

A repeated round of voting saw Attila Kövesdy (Deloitte) elected.

The new board is as follows: President Zoltán Szabó, first VP Ákos Janza, second VP István Katona, secretary-treasurer Ákos Burján, board members at large: Edit Bencsik, Etelka Dobi László Kónya, Attila Kövesdy, Dániel Mayer, Mónika Pais, and Veronika Spanarova.

The supervisory board chair is Andrea Jádi Németh, and the supervisory board member is Judit Budai.

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Budapest Business Journal | December 15, 2023 – January 11, 2024

Sepsey Takes Over at Kinstellar Budapest, Ferenczi to Head Regional Firm Regional law firm Kinstellar announced on Dec. 11 that Balázs Sepsey has been appointed the managing partner of Kinstellar’s Budapest office effective from Jan. 1, 2024. He takes over from Kristóf Ferenczi, who has been appointed Kinstellar’s firmwide managing partner.

“It is a privilege to lead such an outstanding team and build on the success achieved during Kristóf’s excellent leadership, as well as previously under that of Csilla Andrékó.

My pledge to our team is in our values, and I am committed that we will continue to be recognized for our service quality and unwavering commitment to our clients’ success,” he adds.

Sepsey has more than 18 years’ experience advising domestic, regional and international clients on a broad range of energy sector matters, having worked on some of their most complex M&A deals, renewables investments, power plant and energy infrastructure development projects, as well as EU and local energy regulatory work. Kinstellar says he has also been instrumental in a suite of cross-border energy sector matters, assisting the firmwide energy sector team across jurisdictions.

Down-to-earth

Clients describe him as “thorough and fast,” and praise his “very down-to-earth and pragmatic approach to complex projects,” according to Chambers Europe.

As Budapest office managing partner, Sepsey will lead the firm’s Hungarian

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Rising within Kinstellar from junior associate to partner in 2021, Sepsey has become a recognized energy market expert.

The law firm says he has been a key driver of the growth and success of its Budapest energy practice over the years. Prior to his promotion he was already a member of the Budapest office’s management team and a mentor in the local mentoring scheme.

“It is a great honor to be appointed as the Office Managing Partner of one of the most respected law firms in Hungary. I am grateful for the support of the team as I step into this new role,” Sepsey says of his appointment.

Balázs Sepsey

Company TDK Hungary Components Investing HUF 3.5 bln in Energy Upgrades Japanese-owned TDK Hungary Components is investing HUF 3.5 billion in energy upgrades with support from the state, Minister of Foreign Affairs and Trade Péter Szijjártó said on Dec. 5, according to origo. hu. TDK Hungary is installing a heat pump system and solar panels at its base in Szombathely (215 km southwest

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of Budapest), where it makes parts for automotive industry partners, Szijjártó said. He added that the Japaneseowned firm was awarded HUF 1.5 bln in support for the project from the Factory Rescue Program, launched by the government to strengthen companies’ energy independence. Around HUF 150 bln in support has been awarded to 140 companies under the scheme, Szijjártó noted. Japanese companies make up the ninth-biggest group of foreign investors in Hungary and

Kristóf Ferenczi operations, overseeing all aspects of client service, business development, and team management.

“Balázs will be an excellent office managing partner and I am confident that he will provide outstanding leadership to the Budapest office, taking the team from strength to strength,” comments Ferenczi, Kinstellar’s new firm managing partner.

“His proven leadership skills, profound personal qualities, strong work ethic and core values make him the perfect choice to lead the local practice.

I am delighted to be handing over the reins to such an outstanding and talented individual and look forward to continuing to work with Balázs in his new role,” Ferenczi added.

He, meanwhile, will become the first Hungarian to head the regional firm, which was launched in 2008 when London-based Magic Circle law frim Linklaters pulled out of its smaller Central and Eastern European markets and spun off its Bratislava, Bucharest, Budapest and Prague offices. It now has 400 staff in 12 offices across 11 countries in Central and South Eastern Europe and Central Asia.

employ close to 40,000 people in the country, the minister said. Last year, bilateral trade between Hungary and Japan reached EUR 2.5 bln, he added.

Howmet-Köfém Investing HUF 17 bln to Boost Capacity

U.S.-owned Howmet-Köfém is investing HUF 17 billion to boost wheel capacity at its base in Székesfehérvár (65 km southeast of Budapest), Minister of Foreign Affairs and Trade Péter Szijjarto said on Dec. 5, according to origo.hu. The government is supporting the investment, which will create 80 jobs, with HUF 5 bln, Szijjarto said. Around 170,000 Hungarians are employed in the automotive industry.

Nagy és Trócsányi Announces Replacement Managing Partner Nagy és Trócsányi Ügyvédi Iroda has also announced a change in managing partner for the New Year: Balázs Karsai will take over the role from Jan. 1, 2024.

“While continuing to advise clients in complex matters, Balázs will focus on further enhancing the firm’s presence in strategic sectors such as environment and energy, technology and IP & IT, compliance and financial services, together with dispute resolution, including tax litigation,” the firm says in a statement.

“Nagy és Trócsányi’s core strategy of providing market leading local assistance to law firms not present in Hungary will continue, while its decades-long EU law practice will be further strengthened. In furthering our traditional quality management philosophy all members of our firm will continue to pursue long-term success in terms of client satisfaction in an innovative and dynamic way,” the press statement concludes.

Karsai replaces Péter Berethalmi as managing partner. The firm is not the largest (it is ranked 17th in the 202324 Book of lists based on the number of attorneys with a license to practice in Hungary), Nagy és Trócsányi is not without significance. One of the named co-founders, László Trócsányi was Minister for Justice from June 2014-June 2019, and is currently a Member of the European Parliament.

Coca-Cola Hungary Inaugurates HUF 8.7 bln Expansion

Coca-Cola HBC Hungary inaugurated an HUF 8.7 billion expansion at its bottling plant in Dunaharaszti (20 km south of Budapest) on Dec. 5, according to novekedes.hu [Growth].

The 3,000 sqm addition will boost capacity at the soft drink maker’s base by 30%, said Minister of Foreign Affairs and Trade Péter Szijjártó. The state supported the investment with HUF 740 million, he added. The minister noted that U.S.-owned Coca-Cola HBC Hungary buys two-thirds of its feedstock from local suppliers and exports its beverages to 17 countries.

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Country Managing Partner Named at EY Hungary

Tamás Vékási has been appointed country managing partner (CMP) of EY Hungary, the Big Four company tells the Budapest Business Journal.

Vékási started his career at EY in 1997 as a tax advisor.

He worked in the firm’s Amsterdam office, managed the indirect tax department in Slovenia, Tamás Vékási and led the company’s global VAT/ GST tax group in the United States for two years. He headed EY’s indirect tax sub-service line as a partner in Hungary for more than 10 years. Since last January, he has been the leader of the company’s tax and law service line. He specializes in indirect taxes and related digital solutions.

“It is a great honor to represent the company where I started my career more than 25 years ago as

CMP. I am committed to further strengthening EY Hungary’s remarkable community, which has given me so many defining experiences and opportunities both professionally and personally,” Vékási said.

“EY has grown to be able to professionally support almost any aspect of business decisions, from tax and legal advice, through business and strategic issues, to corporate transactions and audit services. The cooperation between the different service lines, complemented by our digital and sectoral portfolio, enables us to solve our client’s most complex challenges from a single source, efficiently and to a very high standard,” the managing partner continued.

“Our mission is clear: to contribute to the further growth of domestic companies and the Hungarian economy, to the international training of professionals, and at the same time to help market players digitally transform,” he added.

Interim CEO at the Helm of Szallas.hu From February The current CEO of Szallas.hu Zrt., József Szigetvári, will step down in February 2024, although he will continue to offer support as a strategic

advisor. The group will be led by Ferenc Rigó, a member of the management from Cluj-Napoca, as interim CEO. Under Szigetvári’s leadership, Szallas.hu has grown from a small tourism start-up based in Miskolc (187 km northeast of Budapest by road) to a József Szigetvári market-leading domestic online booking portal in 12 years and through foreign acquisitions to a Central European group of companies with a 500-strong team operating in five countries.

Its success was recognized in 2022 when it was acquired by Wirtualna Polska Holding, a Polish media and e-commerce giant, as one of the most significant strategic exits in the sector. From February, the outgoing CEO will act as a strategic advisor to the Szallas.hu Group.

“Over the past 12 years, we have written an amazing story with Szallas Group: we took the lion’s share in the digitalization of the Hungarian market and then proved that our strategy works abroad. My personal decision to support Szallas Group’s next big

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leap forward is to continue as a team member, focusing on acquisitions in Central Europe and the digitization of the Polish market,” says Szigetvári.

“We are grateful to József for his vision, commitment and leadership,” said Aleksander Kusz, vice president of WP Holding E-Commerce.

“We are reassured that he will stay with us and continue to drive key strategic projects forward.”

From February until the appointment of a new CEO, Ferenc Rigó, a member of the Szallas Group management team, will lead the group as Ferenc Rigó interim CEO. He has had a similar success story with his Cluj, Romania-based online booking site Travelminit.ro.

“As Head of our Romanian product since 2018, I have taken an active role in the group’s operations, including the development of our new five-year strategy. My main goal is to provide our international team with the right support and vision to build our market-leading products in Central Europe,” stressed Rigó.

PROMOTION

2023: A Year of Developments for Magyar Suzuki 2023 was an eventful year for Magyar Suzuki, bringing numerous successes. All of this is due to the organizational and factory developments of recent years. The OEM in Esztergom has the explicit goal of becoming the region’s most significant and best employer, and this year marked several milestones that contribute to this objective.

Despite logistical challenges, rising energy and raw material prices, and a changing economic environment, the automotive manufacturer, with more than 30 years of experience, emphasized safe and stable operations this year.

One of the most crucial aspects was the appreciation of the employees, as Magyar Suzuki consistently makes it clear that its employees represent the utmost value. In 2023, nearly 3,500 employees were provided with long-term job opportunities, with more than 1,400 strengthening the company for at least 15 years. Together with its nationwide supplier network, Magyar Suzuki contributes to the livelihoods of approximately 10,000 individuals and families daily.

At the end of last year, after consultation with the Works Council, the company announced it would increase the average wages of its employees by 20%. Additionally, based on performance, the firm granted a bonus equivalent to 1.5 months’ salary this year. However, the Esztergom-based company signaled other ways it intends to remain a caring company while maintaining its economic stability: thanks to various organizational development activities, it was awarded the Family Friendly Workplace certificate in the spring. This recognition is presented to workplaces that support and assist their employees in fulfilling their roles within their families.

Beyond Salaries

Magyar Suzuki places significant emphasis on benefits beyond salaries. One of the most outstanding is the annual General Health

Check screening program. Launched in 2016, the program was previously available to colleagues who were 40 years or older and had been working at Magyar Suzuki for at least five years. This year, the company initiated the Suzuki Healthcare program, expanding the circle of eligible individuals. Thus, all employees with at least one year of tenure at Suzuki could participate in the comprehensive screening program. Additionally, the firm opened the Suzuki Health Center, where colleagues receive private healthcare services completely free of charge. Fifteen outpatient specialties and numerous diagnostic tests are available to any colleagues found to have any issues during the annual GHC screening.

The company aims to increase both its staff numbers and facilitate individual workstations as much as possible. By the second half of the year, it had achieved the goal of expanding the workforce and is already concentrating

on the upcoming year. In March, the Chamber of Commerce and Industry of KomáromEsztergom County accepted Magyar Suzuki among the accredited partner organizations for dual vocational training. Moreover, from September onwards, education began at the new Suzuki Training Center. Students studying electronic technology at János Bottyán Technical School can develop their practical skills alongside theoretical foundations in this state-of-the-art educational center.

This is where future professionals are trained, but it’s also an excellent opportunity to discover prospective employees.

Meanwhile, the manufacturing company has continued to devote considerable attention this year to assisting its immediate environment. One of the most significant efforts was when it inaugurated the Suzuki Arena in February as the naming sponsor.

It aims to become a leading cultural, entertainment, and sports center in the region.

Unwavering Popularity Suzuki models remain among the most popular, with good reason, as evidenced by ongoing market recognition. At the “Hungarian Car of the Year” awards, the Esztergom-manufactured S - CROSS received both the professional and the audience awards. Incidentally, the 500,000th unit of this model was completed at the end of September and has since found an owner in France.

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Budapest Business Journal | December 15, 2023 – January 11, 2024

CIB: Inflation to Continue Falling in 2024 as Economy Grows What do you see as the top three downside global economic risks over the next two years?

Although global inflationary pressures are easing, GDP growth in advanced economies has slowed over the past six months.

The Hungarian economy appears to be gradually emerging from the crisis, but the growth outlook for 2024 still looks subdued, according to CIB Bank analysts.

BENCE GAÁL

The Hungarian economy bottomed out in Q2 and then began a slow, gradual recovery. In Q3, Hungary’s Central Statistical Office (KSH) recorded an expansion of 0.9% compared to the previous three months, but on an annual basis, GDP still contracted by 0.3%.

Output fell by 1.2% in the first three quarters, and the last three months will not be able to offset this fully. CIB, therefore, expects a contraction of around 0.5% for 2023 as a whole.

“Following the publication of the first estimate of Q3 GDP, we can say that the Hungarian economy bottomed out in the second quarter and then started a slow, gradual recovery,” said Mariann Trippon, chief economist at CIB Bank.

Household consumption should pick up again next year on the back of a rebound in real wages, a tight labor market and expected moderating financing costs. However, consumption is expected to recover only slowly and gradually after the shocks the sector has suffered in recent years.

CIB’s analysts say the outcome of the EU agreement is critical to investment trends. A positive turnaround, even a partial agreement allowing EU funds to flow, could boost both public and private investment. Nevertheless, limited budgetary space may continue to reduce public investment in the coming year.

CIB adds that the economic downturn has only moderately affected the labor market, with the Hungarian economy at virtually full employment. The shortage of skilled labor will continue to have an impact in the coming years. The unemployment rate has gradually crept up in recent

rate, the weakening of domestic demand also played a significant role in the moderation of the pace of monetary depreciation.

Disinflation could continue in 2024 but at a much slower pace. On the outlook, the forint exchange rate, global energy price developments, tight labor markets, strong wage outflows and the extent of repricing at the beginning of the year are upside risks.

In all likelihood, the rate of monetary depreciation will average around 5% in 2024, and the annual price index will only slip back into the central bank’s target range of 2-4% in 2025.

External Balances In May, the National Bank of The reduction in imports for Hungary (MNB) started a slow, gradual consumption and investment and the normalization of interest rates, in normalization of energy prices led to line with the positive change in the a rapid improvement in the country’s country’s risk perception and declining external position. In the first three inflation. As a result, in September, quarters of the year, the external balance the gap between the base rate and accumulated a surplus of EUR 6.85 billion, the one-week deposit rate closed at and the deficit could exceed EUR 8 bln in 13%. In October, the MNB reduced the 2023. The improvement in the external policy rate to 12.25% and in November balance is also reflected in the current to 11.5%. Another rate cut of 75 basis account. Last year, the deficit exceeded points is expected in December.

8% of GDP, but this year, the current The interest rate path in 2024 may be account could close with a small surplus, determined by global risk sentiment, which will increase further in 2024. country risk perceptions, and the Inflation has eased from its peak in evolution of the forint exchange rate, in January, first at a slow pace and then addition to the inflation outlook. more intensively in the fall months, Data-driven Decisions helped by the high base. The consumer According to the forward guidance, price index fell a shade below 10% in the MNB’s Monetary Council will October and could end the year below remain data-driven in the coming months, deciding on the actual steps to be taken step-by-step based However, average annual inflation could on incoming data and particularly still be around 17.8%. In addition to the focusing on financial market stability. easing of imported inflationary pressures Assuming that market stability is and a more stable forint exchange maintained, easing could continue quarters but has not risen significantly above 4%. As economic activity picks up, the unemployment rate is expected to resume its downward trend in the coming quarters, averaging 3.6% in 2024.

A tight labor market and increases in the minimum wage and the guaranteed minimum wage of 15% and 10%, respectively, will bring above-inflation wage dynamics next year, helping to restore household purchasing power.

Average earnings in the economy as a whole could increase by around 10% in 2024, corresponding to a real wage increase of 4-5%.

7%.

at a faster pace in the first months of next year and then more slowly for the remainder of 2024.

“Assuming that market stability is maintained, monetary easing could continue at a slower pace, with the baserate

at

6-6.5%

by the end of 2024,” Trippon added.

In a broadly supportive external environment in the first part of this year, the reduction in the country’s vulnerabilities and the high interest rate differential provided substantial support to the forint.

The euro temporarily dipped to around HUF 365 in early summer, but appreciation has stalled since.

From the beginning of July, the cross rate moved in the range of 370-395, previously forecasted

by CIB Bank’s experts; in midNovember, it moved closer to the lower boundary. By the end of 2024, CIB predicts the EUR/HUF exchange rate will climb to 384. On the other hand, they expect the USD/HUF rate to fall to just above 343.

CIB’s experts stressed that, despite positive developments such as falling inflation and improving external balances, the Hungarian economy remains vulnerable, for example, due to the fiscal situation and uncertainties surrounding EU funding. Therefore, if, for whatever reason, risk appetite in global markets declines, the impact of domestic weaknesses and the increasingly unattractive interest rate differential from month to month could push the exchange rate in a weaker direction, the analysts caution.

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Budapest Business Journal | December 15, 2023 – January 11, 2024

Special Report Deals of the Year

State Dominates Transactions Market Once Again The Hungarian state has been playing an active role in the acquisitions market for years, and 2023 also fits into this pattern.

The largest was inevitably the Vodafone deal that closed at the beginning of the year, but there is an even more significant purchase in the pipeline.

ZSÓFIA CZIFRA

The year 2023 kicked off with what could well be dubbed the “Deal of the Year,” namely, the acquisition of Vodafone Magyarország Zrt., the Hungarian business of U.K.-based telecom giant Vodafone Group Plc. On Jan. 9, after a lengthy process that had started in the previous year, the formerly stateowned Antenna Hungária Zrt. (a subsidiary of 4iG Nyrt. since 2021), Corvinus International Investments Zrt. (on behalf of the Hungarian State), and Vodafone Europe BV signed the agreement for the acquisition of 100% of the shares of Vodafone Magyarország.

The value of the target company was set at HUF 660 billion.

With the deal, 4iG acquired 51% indirect controlling influence through Antenna Hungária, while the Hungarian State acquired a 49% stake in the second largest telecommunications company on the Hungarian market, behind Magyar Telekom but ahead of Yettel.

Big though it was, that wasn’t the Hungarian state’s only foray into the local telecommunications market: a few

Magyar Bankholding finally became MBH Bank this year, marking the end of the megamerger of three Hungarian banks into one, and launching a new highstreet brand. months later, it exchanged 19.5% of its Vodafone shares for 25% of Yettel (owned

by PPF Telecom Group) and Cetin, which manages its network infrastructure.

It could do this because Antenna Hungária Zrt., when it was still stateowned, bought 25% of Telenor (Yettel’s previous name) for HUF 101.16 billion at the end of 2019. By exchanging ownership stakes worth HUF 125.7 billion, the state now has a minority stake in the two major mobile service providers on the market.

Although competition authority GVH indicated it was interested in looking into the matter, the government designated the Vodafone deal a matter of high national strategic importance, meaning GVH could not intervene.

In the meantime, 4iG was active in the Balkans: the two Albanian telecommunications companies acquired by 4iG in 2022 were united and have operated under the name One Albania since January this year.

4iG, one of the business interests of Gellért Jászai, informed its shareholders on the website of the Budapest Stock Exchange on Feb. 24 that it had increased its share in Israeli satellite operator Spacecom from 9.538% to 20% with a capital increase. 4iG bought its original stake in the company in October 2022. Jászai, incidently, took control of 4iG in June 2019 when he acquired a 40% stake from billionaire businessman Lőrinc Mészáros, a childhood friend and key ally of Prime Minister Viktor Orbán.

Money Matters

Hungary’s largest retail bank, OTP, continued to explore international market opportunities in 2023: in June, it entered the Central Asian region by acquiring majority ownership of Uzbekistan’s Ipoteka Bank. With the transaction, OTP Bank Group became the first foreign player in the Uzbek bank sector. The initial step in the acquisition was completed in the summer when OTP bought 75% of the shares owned by the Uzbek Ministry of Economy and Finance.

The remaining 25% will be purchased in the second step, after about three years.

The Hungarian banking sector also saw continued state activity, with the final steps of establishing the Hungarian bank holding MBH occurring in the spring.

On April 30, MKB Bank and Takarékbank became one and were reborn as MBH Bank. The merger process had been going on for three years, during which Takarékbank’s member organizations were merged, and Budapest Bank (part of GE Capital until it became state-owned in 2015) was subsumed into MKB Bank.

With the merger, Hungary’s second largest purely Hungarian-owned financial institution (as noted above, OTP Bank is the leader) was created; the total balance sheet exceeds HUF 10.6 trillion, and the number of retail and corporate customers is around two million.

MBH Bank continued its expansion toward the end of this year: in November, it announced that it would acquire a 76.35% stake in Fundamenta.

The transaction is expected to close in the first half of 2024, after which Fundamenta will operate as a consolidated subsidiary of MBH Bank but remain an independent entity with its own brand name and company management.

Another announcement stirred the bank sector in November: Erste Group is repurchasing a 15% stake in its Hungarian subsidiary Erste Bank Hungary Zrt. from the 100% state-owned Corvinus International Investment Zrt. The Ministry of Economic Development has stated that the proceeds from the sale, put at approximately HUF 69 bln, will be used to finance the purchase of Budapest Airport.

Flying High

Speaking of the latter, the government has been laying the groundwork for buying back the operator of the Budapest Ferenc Liszt International Airport for some time now. Although the government is quite secretive about the details, Minister of the Prime Minister’s Office Gergely Gulyás said at the end of November that the necessary funds for the airport purchase were available, and the transaction could be completed within weeks. Hungary plans to buy the airport with the French company Vinci Airports, which would own a 49% stake, with the state getting 51%.

As for the funding, apart from the sum coming from selling its stake in Erste Bank, the state also got rid of its 35% stakes in two insurance companies.

Continued on page 16 ›››

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Special Report

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Budapest Business Journal | December 15, 2023 – January 11, 2024

INSIDE VIEW

Investing in Tomorrow: The Promise of Energy Communities in Hungary László Kenyeres

Partner

Associate

WOLF THEISS BUDAPEST

WOLF THEISS BUDAPEST

In a significant stride towards a sustainable and communitydriven energy future, Hungary has recently registered its first energy community, marking a crucial milestone in the nation’s energy landscape.

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Dóri Budai

As the European Union embraced the concept of energy communities in 2019, member states, including Hungary, began integrating this innovative approach into their local legislation. This development paves the way for a dynamic shift in the Hungarian electricity system, offering extraordinary opportunities for stakeholders, particularly investors keen on sustainable ventures.

An energy community is defined as a cooperative society or nonprofit business association that primarily provides environmental, economic, or social community benefits to its members.

The core activities include the generation, storage, and consumption of electricity, distribution flexibility services, electricity sharing, aggregation, and offering electro-mobility services. A notable subset is the concept of renewable energy communities, focusing on electricity production from renewable sources.

The European Union introduced the concept of energy communities to facilitate cost-effective, localized energy production and consumption while supporting the development of decentralized energy structures.

The advantages are manifold: renewable energy production eases the strain on the national grid during peak times, and communities can circumvent network usage fees.

The recent registration of the first Hungarian energy community represents a pioneering step towards realizing energy communities in Hungary.

This initiative is a model for future energy communities, emphasizing the commitment to a greener future and tangible changes in energy production and consumption practices.

The emergence of energy communities in Hungary brings forth a host of advantages for market participants, each finding unique value in this transformative energy landscape. For local municipalities, embracing energy communities translates into enhanced energy resilience and sustainability at a reasonable cost. By actively participating

in or supporting these initiatives, municipalities can contribute to local economic development and ensure a stable and affordable energy supply for their communities.

Direct and Tangible Benefits

Individual citizens within energy communities experience direct and tangible benefits. Beyond cost savings on energy bills, community members actively engage in sustainable practices, fostering a sense of environmental responsibility. Furthermore, local citizens often enjoy social and economic perks, such as strengthened community ties, job creation through energy projects, and increased property values.

Energy aggregators and traders benefit from the predictability and reliability offered by energy communities. The localized nature of energy production reduces transmission losses and ensures more stable energy markets with new market participants to cooperate with the said more professional actors. Aggregators can also tap into a diversified portfolio of renewable sources, optimizing energy trading strategies.

For investors, the appeal lies in the potential for long-term, meaningful contributions to both environmental and social well-being while circumventing the constraints posed by the state of the national grid and the constant developments needed to cope with large-scale projects, thereby making it hard to reach short-term benefits.

However, challenges persist, especially concerning the legal and technical framework for energy communities.

Current Hungarian legislation and metering infrastructure present obstacles to the collective distribution of solar-generated electricity within housing complexes or neighborhoods.

Recent policy changes impacting solar panel incentives in Hungary raise further concerns. Smart metering and other intelligent technologies are also at the beginning of deployment.

Therefore, regulatory adjustments and a more supportive technical environment are anticipated, for which professional legal and technical support will be crucial.

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The “Deal of the Year” may well have come right at the beginning, with the acquisition of Vodafone Hungary.

Continued from page 15 ››› As announced in November, the state would reduce its ownership share in the Hungarian business branch of the Vienna Insurance Group, in other words, insurance companies Alfa and Union, from the previous 45% to 10%.

However, as the airport deal will be pricey, additional funds would still be needed, with possible sources to tap being issuing foreign currency bonds or taking a loan from Vinci Airports.

Insurance Market Consolidation Another insurance deal the Hungarian state secured was much quicker than the airport purchase has proved to be: The state closed a deal to buy a 66.9% stake in Magyar Posta Életbiztosító Zrt. in April. In September, it was announced that Corvinus International Investment would sell its 66.9% share of the insurance company. The government had previously declared that it did not aim to retain its majority ownership in Magyar Posta Életbiztosító Zrt. and Magyar Posta Biztosító Zrt. in the long term. The temporary ownership

aimed to promote the consolidation of the insurance market and maximize the state’s ownership value, it said.

Rolling Ahead

Hungary’s oil and gas giant MOL has stepped into the logistics sector. At the beginning of December, it signed an agreement with Indotek Group to purchase 15% of Waberer’s. At the same time, MOL and Waberer’s entered into a strategic cooperation agreement, with which they plan to strengthen their business cooperation in complex logistics services, alternative fuels, energy efficiency developments and the green energy transition.

The ownership structure of Waberer’s has changed significantly in the past period. This is primarily due to István Tiborcz, who has considerable influence in the company through BDPST Group, which he owns. His personal share and that of BDPST now reach 52%.

Trevelin Holding Zrt., which is linked to Dániel Jelinek, CEO and majority shareholder of the Indotek Group, currently has a 28.9% stake, 15% of which would go to MOL, with the remaining shares to be sold through an investor service provider.

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Budapest Business Journal | December 15, 2023 – January 11, 2024

It’s All in the Books

The Hungarian book and publishing market has also become increasingly state-dominated. The state-owned Matthias Corvinus Collegium (MCC) already had a minority stake in Libri Group, which it acquired in 2021.

However, in June, it was announced it had increased its ownership in the company to 98.41%.

In another deal, Jellinek’s Indotek Group bought 47% of the French retail chain Auchan’s domestic hypermarket business and 100% of the so-called Korzo business. Although it was announced two years ago, the transaction was only closed in October 2023.

The e-commerce market saw an important deal in September: Jófogás and several online classified ad sites are now under Hungarian ownership.

The founders of Extreme Digital and the owner of Ingatlan.com are jointly buying the Hungarian portfolio of the exiting Adevinta. Through the acquisition, a Hungarian online group will be created, which should be able to

compete in the domestic market with increasingly active regional, overseas and Far-Eastern actors, the buyers said in a joint statement following the announcement of the deal.

Message to Construction Market The appetite of Hungary’s third-richest person, the aforementioned Lőrinc Mészáros, must have been satisfied with a food market transaction. Talentis Agro Zrt., part of the Mészáros Group, bought Croatia’s largest producer and exporter of apples and nectarines.

Through the transaction, Talentis Agro Zrt. and MKB Magántőkealap jointly acquire a 100% ownership share in the Croatian Rabo d.o.o. No further details of the acquisition were announced.

Opus Global Nyrt., another element of the Mészáros business empire, announced a deal on the construction market. It increased its stake in subsidiary Viresol Kft. by purchasing a 33.3% stake in Duna Aszfalt Kft. on March 31.

International players active in the Hungarian construction market received a strong message from Minister of Construction and Investment János Lázár. Speaking at a conference, he said that the foreign cement factories in Hungary would do better if they sold their domestic businesses because it is unthinkable that the Hungarian construction industry would not take part in the EUR 10 billion expansion of the Paks nuclear power station.

It is not unimaginable, therefore, that construction sector deals will largely dominate next year’s transactions market.

Nonetheless, in July, the Talentis Group of Mészáros had already signed a letter of intent securing exclusive negotiation rights with Lukavac Cement d.o.o., owned by Austrian Asamer Baustoffe AG., about its acquisition.

INSIDE VIEW

Cybersecurity Challenges in M&A Transactions: Safeguarding Digital Assets Dr. Ákos Mátés-Lányi LL.M. Head of Transactions / M&A Noerr and Partners Law Firm

M&A transactions signify a pivotal moment for companies aiming to expand, consolidate, or diversify their business portfolios. In today’s digital era, the significance of cybersecurity in M&A dealings cannot be overstated.

As technology becomes integral to operations, the risks associated with cyber threats and data breaches amplify, making meticulous evaluation and mitigation of cybersecurity issues an imperative aspect of transactions.

Data Breach or Intellectual Property Theft If a company experiences a significant data breach during the due diligence phase of an M&A deal, it can expose sensitive information, eroding trust between the parties involved. This breach of trust could ultimately lead the acquiring company to back out of the deal.

Financial Loss and Legal Liabilities A cyber-attack that disrupts the operations or financial stability of the target company can also affect the valuation and terms of the deal.

For instance, if a company’s systems are compromised, leading to a significant financial loss or potential legal liabilities, the acquiring company may reassess the financial implications of the acquisition, leading to a renegotiation of the deal terms or even a complete withdrawal.

Reputation Damage A high-profile cyber-attack on the target company can result in severe reputation damage. If the breach becomes public knowledge, it could lead to a loss of customer trust, brand damage, and negative publicity.

For an acquiring company, associating with a target company that has suffered such a breach might be detrimental to its own reputation and business prospects. Consequently, the acquiring company might abandon the M&A deal to protect its own brand and reputation.

involves assessing the target’s data privacy measures, system vulnerabilities, compliance with regulations, and prior history of cyber incidents.

One challenge encountered in this phase is obtaining comprehensive visibility into the target’s cybersecurity landscape. Often, companies lack transparency in disclosing their cybersecurity vulnerabilities, which can lead to overlooked risks.

Conducting thorough cybersecurity assessments, including vulnerability scans, becomes imperative to identify potential threats and liabilities.

Cybersecurity Issues in Drafting Phase In the drafting phase of M&A transactions, integrating cybersecurity concerns into legal agreements and contracts is crucial. Addressing cybersecurity aspects in contracts, including representations, warranties, and indemnities, is essential to allocate risks and responsibilities effectively between the parties involved.

Issues often arise regarding the disclosure of cybersecurity incidents and the allocation of liabilities for any undisclosed breaches post-transaction closure.

Current Trends Recent trends in M&A transactions reflect an increased focus on cybersecurity risks. Buyers are becoming more vigilant, demanding robust cybersecurity assessments and warranties to safeguard their investments. Regulatory bodies are also tightening data protection laws, underscoring the importance of compliance in M&A transactions involving sensitive data. Additionally, emerging new technologies, such as cloud computing, IoT, and AI, introduce complex cybersecurity challenges.

As M&A transactions continue to shape the corporate landscape, the role of cybersecurity in ensuring the success and sustainability of these deals cannot be overstressed.

Addressing cybersecurity issues comprehensively during due diligence and drafting phases is critical.

To thrive in an everevolving digital ecosystem, stakeholders involved in M&A transactions must prioritize cybersecurity diligence, compliance, and mitigation strategies. By doing so, they fortify their organizations against cyber threats, uphold regulatory compliance, and pave the way for successful and secure M&A transactions.

Cybersecurity Issues in Due Diligence Phase Budapest Airport got a new CEO this year. Could Budapest Ferenc Liszt International Airport get a new owner, the state, next year? Photo by Budapest Airport.

During the due diligence phase, potential acquirers scrutinize the target company’s operations, finances, and assets. Evaluating the cybersecurity posture assumes precedence as it

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The funds released by the sale of the ownership share would enable the financing of further domestic and international transactions of the Indotek Group, the company commented on the transaction.

Earlier this year, MOL closed the acquisition of Alteo Group. The deal was announced last December, and the consortium led by the Hungarian oil company now holds a 73.8% stake in the renewable energy utility company.

Also in the first quarter of the year, it was announced that the MOL Group was selling its 39 gas stations in Slovenia to meet the conditions for EU approval of the acquisition of a 92.25% stake in OMV Slovenija. On March 9, the MOL Group signed a sales contract with Shell for the stations.

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Special Report

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Budapest Business Journal | December 15, 2023 – January 11, 2024

2023 a Restrained 12 Months for Deals This has been a restrained year for development activity in the office and retail fields. That in the industrial and hotel sectors, however, has been more dynamic.

Investment activity has reflected the cautious wait-and-see strategy being adopted by investors towards the Hungarian property markets and, indeed, CEE and Europe as a whole.

Office Sector

In my view, the deal of the year in the office sector is September’s acquisition of the first phase of the H2Offices development by the Erste Real Estate Fund. Even if the office asset class remains less prominent than before, transactions are possible for assets that tick all the right boxes, says Benjamin Perez Ellischewitz, principal at Avison Young Hungary.

This transaction involved the purchase of the initial 27,000 sqm phase of the project in the ever-popular Váci Corridor from Skanska. The complex is already Leed “Platinum” accredited, and the developer is also aiming for Well accreditation. The eventual plan envisages three office buildings that will provide about 67,000 sqm of office space.

“We are delighted that our longterm trusted relationship with Erste Real Estate Fund [has] resulted in the successful transaction of the H2Offices project. This transaction stands as a testimony to the interest in highquality and sustainable real estate products, indicating a positive shift in demand on the investment market,” says Katarzyna Zawodna-Bijoch, president and CEO of the Skanska commercial development business unit in CEE. This is the third transaction between Skanska and the Hungarian investors in Budapest after the Nordic

Domestic investors have an advantage over foreign investors, given the former’s knowledge of local conditions and close contact with market actors. Consultancies estimate that 70% of transactions this year have been concluded by Hungarian investors. IO Partners have traced EUR 335 million in investment activity for the first three quarters of 2023, with Hungary third in Central Europe

behind Poland and the Czech Republic, as is the established pattern.

This investor reticence reflects the unstable geopolitical environment, the resulting economic and financial uncertainty, and the expectation gap between buyers and sellers with an anticipated yield correction.

Budapest Business Journal real estate editor Gary J. Morrell picks out some of the highlights of the year.

Light and Mill Park deals in 2016 and 2018, respectively.

“In offices, the move of Wizz Air to Millennium Tower I for roughly 8,000 sqm and the consolidation and rationalization of the Deutsche Telekom Group in the Telekom HQ building, with IT Solutions taking 11,000 sqm, are the most significant deals,” adds Benjamin Perez-Ellischewitz.

speculative development with a strong prelease, letting a significant part of a project, and finally, a sale to an investor.

“We have sold RoseVille to an international investment group with a Hungarian fund. The sale was quick and aligned with current market conditions. This was the first real estate acquisition by the group in Hungary, and we see it as positive that we have attracted new equity, although, in the current investment environment, only opportunistic investors are looking at Hungary,” says Máté Galambos, director of leasing at Atenor Hungary.

Although no yields have been announced on the above-mentioned transactions, Colliers estimates Budapest office yields at 6.25%, with industrial at 6.5% and shopping centers at 7.5%. Prime Budapest office yields have shifted by 75-100 basis points to 6.5%, according to iO Partners Budapest.

Away from the disposal side of the business, Skanska is also doing well in terms of finding tenants, and has achieved the milestone of 80% leased space at H2Offices.

“The demand for this building has been consistently high since the start of its development, with a steady stream of inquiries for the remaining available spaces, as well as strong interest for H2Offices as a complex,” the developer says. “For our tenants, the mix between

“In offices, the move of Wizz Air to Millennium Tower I for roughly 8,000 sqm and the consolidation and rationalization of the Deutsche Telekom Group in the Telekom HQ building, with IT Solutions taking 11,000 sqm, are the most significant deals.”

Atenor has sold the recently completed the 15,500 sqm RoseVille office complex in District III, certified “Excellent” by Breeam. The deal follows a traditional pattern for the regional developer:

Atenor sold its 15,500 sqm RoseVille office complex in District III to an international investment group with a Hungarian fund, attracting new equity to the market.

the quality of our class ‘A’ building in a top location and the ESG principles was crucial in choosing the new space for their employees,” it insists.

“There is an increasing trend among tenants for seeking buildings that have ESG criteria at the base of their concept and development. Energy-efficient buildings not only contribute to reducing the carbon footprint but also result in lower operational costs, which is an attractive proposition for businesses. Additionally, more companies have their own ESG objectives, and such a carefully developed building […] can support them in achieving their real estate objectives,” Skanska adds.

According to the developer, the project has set a new benchmark on the Hungarian market by achieving Leed “Platinum” certification with 84 points, the highest score yet achieved

The first phase of Skanska’s H2Offices development was acquired by the Erste Real Estate Fund. in Hungary. The company is also in the process of obtaining Well Health & Safety recognition. The sustainable solutions have resulted in a 40% reduction in water usage, a decrease of 290 tonnes of annual carbon dioxide emissions, and energy consumption reductions of 30%. This data is based on Leed calculations and comparisons.

In terms of new projects, office developers are exercising caution and not initiating them in an uncertain development environment. However, despite concerns over longer-term letting and demand, working practices and the time spent in the office, alongside rising development, construction, maintenance and energy costs and more expensive debt finance, already launched projects, both singlebuilding and phased, are going ahead.

The current financial environment and high interest rates favor developers able to use their own funds or sell assets to investors. IO Partners has traced 4.34 million sqm of office stock in Budapest with a current vacancy rate of around 13%. A further 287,000 sqm of space is under construction and expected to be completed between now and 2026.

An alternative development option to building from new is the redevelopment and renovation of existing quality Continued on page 20 ›››

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PROMOTION

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BDPST Group: Synergies of the New Age For BDPST Group, 2023 was a year of adaptation to change, dynamic development and diversified investments. It was also a landmark year in that we embarked on the bumpy road to becoming a regional player, in parallel with strengthening our position in our home market.

The year 2023 saw not one but many deals, acquisitions and investments in the life of BDPST Group, which in some ways were milestones and brought us closer to our strategic goal of becoming a crosssectoral group with an outstanding market performance, able to compete internationally.

But if I had to highlight one area where we have made the most progress, it is our financial portfolio. Here, we have started the process of integrating a number of separate companies and services, creating a strong, diverse financial entity. As a result, Gránit Bank, operating as a digital bank, will increasingly become a full-service financial institution, offering a wide range of fund management and investment banking services. This integration will allow us to serve retail and corporate customers even more efficiently and to raise customer satisfaction to the highest level.

In the logistics sector, another relatively new investment area for the BDPST Group, Waberer’s International performed very well. Despite market and economic challenges, the group has increased its performance and market share in recent years. In line with its recently confirmed business strategy to become the region’s number one complex logistics provider, it has made investments and acquisitions that support the achievement of this goal.

One of its largest warehouse investments in Ecser, which is being built next to the strategic M0 ring road, will be the group’s most sustainable logistics center. The acquisitions of the Serbian distribution company MD International and the majority stake in Petrolsped also fit well into Waberer’s portfolio and effectively support its strategic objectives.

With these acquisitions, Waberer’s is broadening its service portfolio to serve its customers at the highest level as an integrated logistics provider. The addition of Petrolsped was also a critical step in the group’s entry into the rail logistics sector, thus taking a significant step towards building a multimodal service portfolio.

We have also had a busy year in what we call our “traditional” areas: tourism and real estate development. Perhaps the most important event in this area was the opening of the Dorothea Hotel in November, one of the capital’s most significant property development projects this year. Operating under the umbrella brand of the Marriott International Autograph Collection,

Special Report | 19 István Tiborcz is a capital investor and the owner of the dynamically growing BDPST Group, a leading player in tourism property development, financial services, international and domestic freight transport and complex logistics segments.

Founded in 2015, the company is now a listed player in Central Europe.

The energy crises have also contributed to increased interest in sustainability worldwide. As a result, sustainable investments and projects have become more attractive to capital market players.

BDPST Group, as an equity investment company, is building a diversified portfolio with synergistic elements that are resilient to global crises. A focus on sustainability further strengthens the firm’s position against market volatility.

Focus on Innovation and Sustainability

István Tiborcz the hotel encompasses three buildings of different eras and styles, preserving historic and heritage values.

The year also saw the acquisition of the iconic Tokaj winery, Patricius Wine House, in March, and in May, the group invested in the Pannónia Golf & Country Club, which has an exclusive restaurant, 10 rooms, a conference venue and a world-class golf course, and is being further developed and repositioned through value-added investment. The Botaniq Buda Club, also built and operated by the group, opened in August, following the standards of British private clubs. In the next few years, the big thing in our tourism segment will undoubtedly be the complex renovation of the Gellért Hotel, which will return to Budapest its former emblematic hotel in renewed splendor.

investments, taking into account new market realities. As the group’s flagship, Gránit Bank has developed a fresh business strategy to adapt to the latest market conditions, with a particular focus on housing lending and housing market trends, responding to the reduction of the equity in housing loans and the opportunities in the real estate market. Waberer’s International is also laying the foundations for the dynamic growth it expects in the coming years with a renewed business strategy focused on sustainability.

2023 was a year of adaptation to change, dynamic development and diversified investments for the BDPST Group. Successes in the financial, logistical and traditional areas, as well as the newly launched, innovative or particularly complex projects such as the planned renovation of the Gellért Hotel, show that the group is ready for the challenges of the future. In the coming year, the BDPST Group will continue to pursue growth, innovation and sustainability to become a dominant player at the regional level. For us, and me personally as a father of several children, economic, social and environmental sustainability is of paramount importance to leave a livable planet for future generations. So, in the coming years, we will be looking towards investments that take these criteria into account.

New projects and acquisitions, as well as the development and optimization of the existing portfolio, will be the cornerstones of the group’s strategy to strengthen our market position and further increase our value for our partners and customers.

The BDPST Group is committed to staying at the forefront of market trends, implementing innovative solutions and achieving long-term sustainable growth in regional and global markets.

Strategic Flexibility on Road to Success In the shadow of global crises and geopolitical tensions, the BDPST Group has shown considerable adaptability and resilience. It has successfully navigated different sectors of the economy in changing market conditions. In particular, the successes in the logistics and packaging industries and the developments in the tourism sector are evidence of this. The group has actively adapted to changing demand patterns and market trends.

Geopolitical tensions have hit the real estate market particularly hard. Our strategy has been geared towards safe

Dorothea Hotel, Budapest

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Special Report

Continued from page 18 ››› buildings, notably in the Central Business District, where there is a scarcity of building plots but a number of listed properties in need of renovation.

[Editor’s note: A similar approach is also sometimes taken in the hotel sector. Read the Hotel and Hospitality section below for more on this.]

“Given the current market environment, timing in terms of related costs may well mean further implications to pricing that have not yet been factored in. However, increasing pressure is being applied to the property and financing industries in terms of their compliance with European ESG regulations.”

A prime recent office example of this was Europa Capital’s purchase of the 12,500 sqm Academia office building on the Pest embankment in partnership with ConvergenCE as asset manager. The pair have undertaken an extensive renovation in line with Breeam requirements. The development has already been awarded Well pre-certification status, and full accreditation is expected for the summer, according to ConvergenCE. “ESG requirements are mainly tenantled, and we designed the Academia project based on ESG principles, using the Hungarian BuildEXT architects.

This [property] is located in the CBD, where there are few developments for new build projects. We do not undertake development of new buildings from the ground but focus on valueadded developments of existing buildings that require refurbishment,”

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comments Csaba Zeley, managing director of ConvergenCE. Academia had its grand reopening on Sep. 29.

Industrial and Logistics

The industrial sector continues to attract specialist developers and industrial park operators in addition to established players from other fields, such as office or residential, moving into what is considered an attractive property market. Total industrial stock in Hungary has reached 5 million sqm, out of which 3.4 million sqm is located in the Greater Budapest area, according to Cushman & Wakefield.

Benjamin Perez-Ellischewitz of Avison Young Hungary sees the 24,000 sqm prelease by Transdanubia at HelloParks Páty as a landmark achievement for the industrial and logistics sector. Panattoni, meanwhile, has agreed its third built-tosuit project in Hungary with a 32,000 sqm development for a national retail chain.

Despite the development boom in this sector, investment activity is limited by industrial park operators tending to hold on to their stock for the longer term, especially given the favorable market conditions. One transaction that does stand out is the sale by Panattoni of two regional development projects to Hungarian buyers.

Hotel and Hospitality

Despite the perceived complexities of hotel development and investment projects, hospitality has successfully attracted investors and developers from the more traditional commercial property sectors.

A commonly used route is to conclude a long-term lease or franchise partnership with experienced branded operators who provide the hotel and hospitality-related expertise, in theory leaving the investors to concentrate on their portfolios.

A prime example of this is W Hotels, part of the Marriott brand, which opened the 150-room and suite luxury W Hotel Budapest in July, following the renovation of the 16,000 sqm UNESCOlisted Drechsler Palace on Andrássy út. The project, by QPR Properties of Qatar, has been ongoing for years and was subject to several delays.

Wing will develop a 167-room, four-star Tribe hotel (with the dark roof in this artist’s rendering) adjacent to the Ibis Styles Budapest Airport Hotel, which the same developer completed in 2018.

This reflects the potential difficulties of developing in the historic center with the strict and often complex planning regulations that require separate permissions from city and heritage authorities. A notable trend in the Budapest market has been the purchase and redevelopment of classical Central European buildings into hotels, giving the properties a use-value while at the same time maintaining the Dual Monarchy feel of the historic center of the city.

Wing has launched several new hotel projects. This year, it has agreed to develop a 167-room, four-star Tribe hotel adjacent to the Ibis Styles Budapest Airport Hotel that the same developer opened in 2018.

This will be the second Tribe Hotel in Budapest after the one in the mixed-used Liberty complex that Wing delivered earlier in 2023. This includes class “A” office and commercial units in addition to the hotel, which is dual branded, consisting of the three-star Ibis Budapest Stadium and the four-star Tribe Budapest Stadium. Wing has also brought two new hotel brands to Budapest with developments for IHG Hotels and Resorts and Holiday Inn Express.

is no activity in the sector. The Hungarian Adventum Investment Fund Management Zrt. has purchased a portfolio of Tesco retail parks in Hungary and the Czech Republic and is redeveloping 15 of these across Hungary.

“We are responsible for 15 projects and locations around Hungary. The total size of the portfolio is 320,000 sqm GLA. This is a good opportunity to create added-value retail space, renew leases and introduce new tenants to create a better quality of retail galleries in this portfolio,” comments Erika Garbutt-Pál, head of retail at CBRE Hungary.

ESG Considerations

In addition to the ongoing price correction that is causing yields to move out, the investment market is impacted

by ESG and sustainability issues, especially at the higher end. According to Colliers, ESG-compliant buildings are slowly becoming the market norm, reflecting a broader commitment to sustainability from developers, owners, investors, lenders and occupiers.

The above-mentioned RoseVille is an excellent example of this, according to Retail Zsombor Barta, ambassador (and former There are no plans for another Budapest president) of the Hungarian Green shopping center for the foreseeable Building Council. “Sustainability aspects future, but that does not mean there played an important role during this investment; therefore, I am expecting more of these deals, where sustainability is considered one of the main elements and aspects from an investment point of view,” he says.

Kevin Turpin, the regional director of capital markets in Central and Eastern Europe for Colliers, expects the ESGrelated pressure on developers will only grow. “Given the current market environment, timing in terms of related costs may well mean further implications to pricing that have not yet been factored in. However, increasing pressure is being applied to the property and financing industries in terms of their compliance with European ESG regulations,” he comments.

Hubert Abt, CEO of New Work offices, says ESG compliance is becoming the buzzword. With more education and pressure from banks, tenants and investors, landlords will realize the need to comply with EU Taxonomy and The 45,000 sqm MG3 warehouse of HelloParks Maglód was the first industrial property in Hungary to earn spending in ESG compliance is not only the highest “Outstanding” rating in the New Construction category of the Breeam sustainability standard. a cost but a highly profitable investment.

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Françoise Gilot Exhibition Opens in Country she Loved

As “Rising Phoenix,” the most comprehensive European exhibition of the work of the artist Françoise Gilot to date, opens at the Műcsarnok Kunsthalle Budapest, David Holzer speaks to the show’s curator, Krisztina Kovács.

Gilot, an only child born into an uppermiddle-class family in the Parisian suburb of Neuilly-sur-Seine in 1921, passed away in June this year. Early on, she demonstrated her independent spirit, saying later, “I refused to submit to rules if I did not see they had any meaning.”

She decided to paint full-time after World War II broke out and Paris fell to the Germans. Abandoning her studies at law school and banished from the family home by her father, Gilot entered the atelier of Hungarian surrealist Endre Rozsda. He would become a mentor and lifelong friend and spark her profound love of Hungary.

Born in Mohács in 1913, Rozsda was regarded as a significant talent in Hungary from his first exhibition in 1936. He moved to Paris in 1938 and became intrigued by surrealism. When the Germans occupied Paris, the gay Jewish Rozsda returned to Budapest. Back in Hungary, he embraced surrealism fully. After the brutal suppression of the Hungarian Revolution in 1956, he returned to France, where he lived for the rest of his life.

Gilot met Picasso in a restaurant in Paris in 1943. She was 21, and he was 61. For many years, her extraordinary accomplishments have been somewhat obscured by the simplistic assumption that she was only ever Picasso’s muse.

As Krisztina Kovács tells me, “While she was with Picasso, Gilot’s

organized her first solo exhibition in Hungary. This was followed by several more. While she was healthy enough to do so, Gilot always attended.

The artist loved Hungary. Her visits to Budapest inspired her to paint the city. “Cityscape III” shows Clark Ádám tér and the Chain Bridge emerging from stacked abstract forms.

In 2021, after she’d stopped painting new work, the Várfok organized a Gilot retrospective together with her daughter Aurelia. Although Gilot was unable to attend, she chose the work she wanted shown.

“She worked with so many techniques with such professionalism. Throughout her career, she uses ink, monotypes, watercolors Forward and Around, 1984, by Françoise Gilot. and oils. At the Műcsarnok, I wanted to celebrate this with different forms. She worked work did take on some aspects of constant experimentation.” with so many techniques with such his style, but she did everything she

could to resist the influence.”

This “influence” appears rather sinister.

Once, because he thought she wasn’t paying close enough attention to him, Picasso burned Gilot’s cheek with a cigarette.

Ressurection

When Gilot left Picasso in the early 1950s, she had to, as Kovács puts it, “resurrect herself.” This is one of the reasons why Kovács chose “Rising Phoenix” as the title of the Műcsarnok exhibition.

“Gilot worked a lot from symbols,” Kovács explains. “Many times in her oeuvre, she painted phoenixes. One of her artworks is called ‘Rising Phoenix.’

The title of the exhibition also honors the fact that, with her passing, Gilot has ascended to heaven.”

Gilot wasn’t a one-dimensional artist. As the show at the Műcsarnok conclusively demonstrates, she experimented with different styles from the very beginning. A composition from the 1940s shows her trying constructivism.

The exhibition includes examples of Gilot’s art throughout the main periods, themes, and series of her more than eight decades of painting. These include a self-portrait made when she lived with Picasso, a lithograph from her time at the legendary Mourlot studio in Paris, her floating canvases from the 1980s and pieces from her 1990s “Wanderer” series.

For Kovács, who adores Gilot’s work and admires her as a woman, her oeuvre shows “the same mind dealing

professionalism. Throughout her career, she uses ink, monotypes, “Gilot was already a legend In Hungary, watercolors and oils. At the Műcsarnok, but I think the retrospective touched I wanted to celebrate this constant the audience even more,” Kovács told me. experimentation. On one of the walls, “It was a huge success and came at a time you can see works from different periods. There are pieces that are really when women artists were becoming more respected. On the last day, we had 400 abstract next to painting that’s more visitors, which is incredible for the Várfok.” symbolic and so on.”

One of these visitors was György Through “Françoise Gilot: Rising Szegő, the director of the Kunsthalle at Phoenix,” Kovács is keen to highlight Műcsarnok. “He really liked the work,” the artist’s remarkable versatility.

Kovács says, “and we started to talk about The author of books on art theory, a larger exhibition of Gilot’s work at the including on Picasso and her friend Kunsthalle with her family. Gilot was Matisse, she published and illustrated volumes of poetry, taught at universities, delighted. Unfortunately, she passed away.

That’s why it’s even more important to and made scenery and costume honor her with Rising Phoenix.” designs for dance performances.

Ultimately, as Kinga Popovics wrote, “Her philosophy as an artist was determined by the versatility of her art “Françoise Gilot: Rising [….]. On the subject of her instinctive Phoenix” is at the Műcsarnok approach to painting […], she said, ‘I see Kunsthalle Budapest until Feb. no difference between the figurative and 4, 2024. Standard tickets cost the abstract. I do not copy after nature HUF 1,600, and concessions with what my eyes see, but I express what my a valid ID HUF 800. The building heart captures of its colors and shapes.’” is open on Wednesdays and from Friday to Sunday from 10 a.m.

The Hungarian Connection to 6 p.m. (last entry 5:30 p.m.), The exhibition is the latest flowering of on Thursdays from noon to Gilot’s strong connection with Hungary, 8 p.m. (last entry 7:30 p.m.) which began when she first set foot in and is closed on Mondays and the atelier of Rozsda.

Tuesdays. If you plan to see Many years later, he introduced Gilot the show over the holidays, to Károly Szalóky, owner of the Várfok the Műcsarnok will be closed Galéria at Várfok utca 11, Budapest. on Dec. 24-26 and Dec. 31-Jan. 1.

Szalóky became a great admirer of Gilot’s work. In May 2000, the Várfok

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Photos by Pelle Photo

Projects Supported by the 2023 Budapest Burns Supper Tickets for the 2024 edition of charity fundraising Budapest Burns Supper at the Corinthia Hotel Budapest on Jan. 27 are apparently selling like the proverbial hotcakes. Considering that, it seems a good time to review how the money raised this year was spent.

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The 2023 Burns Supper raised almost HUF 13.5 million thanks to the generosity of the many guests and sponsors, says the organizing Robert Burns International Foundation.

The RBIF used these funds to support seven different projects in five towns and cities during the year. All helped, in different ways, to raise the standard of pediatric medical care in Hungary, the foundation says.

Douglas Arnott, chairman of the RBIF, thanked supporters of the ball for their continued backing.

“Your assistance year-in, year-out is hugely appreciated not just by the volunteers at the RBIF but by the many doctors and nurses whose daily work is facilitated by your donations,” he said.

“Thank you for helping us, and we would

be delighted if you could contribute in any way to our forthcoming event to be held on Jan. 27, 2024!”

The following is a necessarily brief description of the hospitals supported by the funds raised in 2023. More information on each project can be found on the foundation blog: rbif.hu/blog/ Szent Rafael Zala County Hospital, pediatric department, Zalaegerszeg 230 km southwest of Budapest Equipment for outdoor therapy playground, together with FirstMed Centers Mezőtúri Hospital, children’s department, Mezőtúr 150 km southeast of Budapest Complete re-decoration of the children’s department, plus inhalators and pulse oximeters, together with HLI Kft. 2nd Department of Pediatrics of Semmelweis University, Tűzoltó utca, Budapest

NanoDrop Spectrophotometer for highly accurate analysis of DNA samples Jávorszky Ödön Hospital, Vác 45 km north of Budapest Advanced therapy set for child psychology sessions and volumetric pumps, together with Norhot Kft. 2nd Department of Pediatrics of Semmelweis University, Tűzoltó utca, Budapest Mattress protectors bought together with BME International Secondary Grammar School Péterfy Sándor Utca Hospital and Trauma Center, newborn and infant department, Budapest

Who is the RBIF? The Robert Burns International Foundation is an entirely voluntary and overhead-free organization that has raised funds for child healthcare in Hungary since 1998. A six-member board runs the RBIF, while its accounting and audit are handled by Moore Hungary and KPMG, respectively, as sponsors, ensuring transparency. Its patrons are the U.K. Ambassador to Hungary and the Hungarian Ambassador to the United Kingdom. More information can be found on the foundation website: rbif.hu

WILAflow Elite non-invasive ventilator for premature and newborn infants, plus associated dehumidifier and pulse oximeters Csongrád-Csanád County Hospital, pediatric department, Hódmezővásárhely 190 km southeast of Budapest An SM-01 sweat analyzer system for cystic fibrosis diagnosis, bought together with Inter Relocation Kft. Editor’s note: In the interests of full disclosure, it should be noted that BBJ editor-in-chief Robin Marshall is a member of the RBIFboard.

United Way Hungary Champions Community Spirit at Annual Gala United Way Hungary held its annual fundraising gala in the ballroom of the Budapest Marriott Hotel on Nov. 30 (on the same evening as the Budapest Business Journal staged its BBJ Santa Claus business mixer downstairs.)

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More than 180 guests representing companies, institutions, NGOs, and volunteers were invited to celebrate this year’s achievements.

Under the motto “bringing together the caring power of local and regional communities,” United Way programs focus principally on children and youth, the organization says. It aims to help children perform better through reading and financial literacy programs. It supports

The G.A.S. Art group, who fled Ukraine over a year ago, gave a dance performance about the difficulties and hopes of making a new beginning. young people in developing their employability and entrepreneurship skills to create a better chance for economic mobility.

United Way says it is also active in helping Ukrainian refugees to rebuild their lives in Hungary.

A performance by the G.A.S.

Art group, which fled Ukraine over a year ago, introduced the difficulties and hopes of making a new beginning through the creative medium of dance. Besides the dance show, an awards ceremony, cocktail bar, live music, and auction made for a memorable evening.

At the gala, Marriott Budapest multi-property general manager Arne Klehn handed over a check for more than HUF 4.3 million. It represented the proceeds from the hotel chain’s “You Eat We Give” campaign, where the business pledged EUR 1 for each food item ordered in its restaurants in September and October.

Several of the properties in Hungary participated, including Courtyard by Marriott Budapest City Center, Four Points by Sheraton Kecskemét and the Budapest Marriott Hotel. A total of EUR 13,785 (EUR 11,196 of it collected by Marriott Budapest) was handed over, head of marketing Edina Lányi-Biró told the BBJ.

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Chamber of Commerce Corner

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This regular section of the Budapest Business Journal features news and events from various international business chambers. For further information and to register for specific events, visit the website of the organizing chamber. If you have information for inclusion on this page, send an email in English to Annamária Bálint at annamaria.balint@bbj.hu

The Netherlands-Hungarian Chamber of Commerce (Dutcham) The annual Dutcham Christmas Drinks will be held on Dec. 19 from 6-9 p.m. at Crowne Plaza Hotel, a “cool place” with warm foodand drinks www.dutcham.hu

Joint Venture Association (JVSz)

Canadian Chamber of Commerce in Hungary (CCCH) On Dec. 12, the CCCH held its annual reception.

The event was an excellent end-of-year celebration and was a great success, with many influential business people attending, the chamber said.

It would like to thank everyone who attended.

“To our new members, thank you for your trust; to our long-standing members, thank you for your loyalty; and to our sponsors, thank you for your support. We hope that together, we can continue to organize great events in 2024. Happy holidays and a prosperous New Year!” a CCCH spokesperson told the Budapest Business Journal.

French Chamber of Commerce in Hungary (CCIFH) On Nov. 25, the CCIFH hosted its “Eiffel” Gala Dinner. The prestigious full-house event celebrated the immense heritage left by Gustave Eiffel: a century ago, a French architectural marvel was born that defied the limits of possibilities and captured the imagination of the whole world: the Eiffel Tower. The symbol of progress and boldness has become an icon of Paris and a universal symbol of France.

President of Hungary Katalin Novák was the guest of honor. Mrs Myriam Larnaudie-Eiffel, president of the association run by Gustave Eiffel’s descendants and his great-greatgranddaughter, also attended and supported the event. Entertainment and live music evoked the remarkable era of Eiffel: in 1889, the Eiffel Tower was built, the Moulin Rouge opened, Montmartre became the cradle of artists and painters, and Bizet composed Carmen. CCIFH thanks its sponsors and exhibitors for their support.

On Feb. 3, 2024, JVSz will organize one of the most prominent events in Budapest’s business life, the “Companies for the Future Awards” Gala, where six corporate awards will be presented alongside entertainment and networking opportunities. The patron of the event is Minister of Economic Development Márton Nagy. For almost 40 years, JVSz has been honoring medium- and large-sized companies that support the Hungarian economy, society and a sustainable future through their activities.

Swiss-Hungarian Chamber of Commerce (Swisscham) Swisscham Hungary would like to thank its members and partners for a successful year and wish everyone a happy and peaceful holiday season. Stay tuned to our events in 2024!

German-Hungarian Chamber of Industry and Commerce (DUIHK) Belgian Business Club in Hungary (Belgabiz) Belgabiz members and their friends gathered for the last time this year on Dec. 7 for a cross-cultural beer-tasting event at Taiwan Restaurant. With the expert guidance of the beerporn.hu Beer Magazine, the event featured a delightful fusion of Hungarian and Belgian beers by @Belga Sörmester, perfectly paired with tantalizing Chinese cuisine! A fantastic celebration of diverse flavors and cultures, it was an evening filled with great company and exceptional brews, Belgabiz said.

Italian Chamber of Commerce for Hungary (CCIU) On Dec. 7, took place the magnificent Christmas Gala of the Italian Chamber of Commerce for Hungary. A special thank the Italian Ambassador in Budapest, S.E. Manuel Jacoangeli, for his support on this remarkable occasion along with the new Consul Diego Randazzo, Giovanna Chiappini Carpena, director of the Italian Trade Agency, Péter Garai, of Adria Port and the representatives of numerous Hungarian Chambers of Commerce.

CIB Bank Zrt. was awarded for its commitment and dedication towards the CCIU and great support.

A heartfelt thanks goes to our sponsors, DAB Pumps Hungary Kft., Pirelli Kft., SIAD, Beghelli, Kometa 99 Zrt., Ferrero Kft., Balli Vini, San Benedetto Group, Lucart Kft., Burrata Mozzarella Kft., Italian Excellence, O Bag Hungary, Marlù Kft. who made the event possible!

We are grateful to the CCIU Members, Institution representatives of Confindustria Hungary, Comites Hungary, Confimprese Hungary who joined us for this special celebration - a fantastic evening of networking and holiday greetings in a truly unique and unforgettable experience.

2024 will be a year of economic recovery, according to the expectations of Radovan Jelasity, CEO of Erste Bank Hungary and president of the Hungarian Banking Association, and Deputy State Secretary Gábor Szőcs of the Hungarian Ministry of Finance. Both spoke at this year’s DUIHK economic forum on Dec. 5.

In his remarks, DUIHK vice president Markus Hilken, managing director of SAP Hungary, noted that the past four years have probably been the most difficult in recent decades for the Hungarian, German and European economies as a whole. In addition, companies in many sectors also had to cope with far-reaching structural and technological transformations, such as the reorganization of energy systems, changes to the automotive industry and the penetration of artificial intelligence into almost all areas.

Klaus Günter Deutsch, director of research and economic and industrial policy at the Federation of German Industries (BDI), who sees only very weak growth prospects for Germany in the coming year, joined the event from Berlin.

Dirk Wölfer, head of communications at the DUIHK, presented the chamber’s latest economic survey, which revealed a very subdued business climate among German companies in Hungary.

We wish all our business partners, and readers Happy Holidays, and a peaceful, prosperous New Year